Liquidity, capital controls, and exchange rates
Article Abstract:
Exchange rates are found to be sensitive to the relative liquidity of goods and financial markets in this study based on a two-country version of Lucas' closed economy model. Factors in establishing exchange rate equilibrium level include the percentage of money used involved in asset transactions, as well as the presence of capital controls such as taxes on acquisitions of foreign assets, and the public debt maturity structure. The model presented includes a balanced current account which is unrelated to the exchange rate, and cash-in-advance constraints on the lender.
Publication Name: Journal of International Money and Finance
Subject: Economics
ISSN: 0261-5606
Year: 1993
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Dual exchange rates under pegged interest rate and balance-of-payments crisis
Article Abstract:
A model of dual exchange rates combined with pegged interest rate is presented. One of the assumptions of the analysis which is said to conform fairly well with the case of Belgium during 1979-1980 is that domestic interest rates are held constant by the central bank using a policy of sterilization. In the dual exchange rate case, capital account transactions take place at a financial rate determined by the market, while current-account transactions fall under a fixed commercial rate. Areas for further consideration are explored.
Publication Name: Journal of International Money and Finance
Subject: Economics
ISSN: 0261-5606
Year: 1993
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Nominal exchange rates and unit roots: a reconsideration
Article Abstract:
A study was conducted to present empirical proof that nominal exchange rates are stationary and are not random walks. The study is opposed to other research which provide that unit roots are present in exchange rates and support the theory of random walk. A new statistical test for unit roots based on posterior odds ratios is applied. Results show that stationary exchange rates exhibit favorable response from several countries.
Publication Name: Journal of International Money and Finance
Subject: Economics
ISSN: 0261-5606
Year: 1992
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