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Foreign Exchange Intervention For Internal Balance

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  • Kim Kyung Soo

Abstract

This paper is concerned with the optimal combination of sterilization and wage Indexation in a small open economy subject to various disturbances. In most cases the Effects of these policy instruments are interdependent such that they act like a single Instrument. At the optimum, in addition to the well-known substitutability of foreign Exchange intervention and wage indexation , the complementarity of foreign exchange Intervention and sterilization is obtained. The relationship between the degree of Capital mobility and the optimal combination of the policy instruments is also examined. [E52, F4]

Suggested Citation

  • Kim Kyung Soo, 2000. "Foreign Exchange Intervention For Internal Balance," International Economic Journal, Taylor & Francis Journals, vol. 14(4), pages 59-75.
    • Handle: RePEc:taf:intecj:v:14:y:2000:i:4:p:59-75
    DOI: 10.1080/10168730000000035
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    1. Guillermo A. Calvo & Leonardo Leiderman & Carmen M. Reinhart, 1993. "Capital Inflows and Real Exchange Rate Appreciation in Latin America: The Role of External Factors," IMF Staff Papers, Palgrave Macmillan, vol. 40(1), pages 108-151, March.
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    10. Guillermo A. Calvo & Leonardo Leiderman & Carmen M. Reinhart, 1993. "Capital Inflows and Real Exchange Rate Appreciation in Latin America: The Role of External Factors," IMF Staff Papers, Palgrave Macmillan, vol. 40(1), pages 108-151, March.
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