City Research Online

The relative effectiveness of sterilized and non sterilized foreign exchange market interventions

Pilbeam, K. ORCID: 0000-0002-5609-8620 (2005). The relative effectiveness of sterilized and non sterilized foreign exchange market interventions. Journal of Policy Modeling, 27(3), pp. 375-383. doi: 10.1016/j.jpolmod.2005.01.003

Abstract

This paper examines the impact of non sterilized and sterilized foreign exchange market operations on both the exchange rate and domestic interest rate within the context of a rational expectations portfolio balance model. The results show that non sterilized intervention will be more effective than sterilized intervention in affecting both the exchange rate and domestic interest rate. Both types of operations affect a market risk premium that is shown to be a function of relative asset supplies in the hands of the private sector. When domestic and foreign bonds are perfect substitutes, the risk premium vanishes and so to does the effectiveness of sterilized foreign exchange market interventions.

Publication Type: Article
Additional Information: © Elsevier 2005. This manuscript version is made available under the CC-BY-NC-ND 4.0 license http://creativecommons.org/licenses/by-nc-nd/4.0/
Publisher Keywords: Exchange market intervention, Sterilized intervention, Non sterilized intervention
Subjects: H Social Sciences > HB Economic Theory
H Social Sciences > HG Finance
Departments: School of Arts & Social Sciences > Economics
URI: https://openaccess.city.ac.uk/id/eprint/23367
[img]
Preview
Text - Accepted Version
Available under License Creative Commons Attribution Non-commercial No Derivatives.

Download (64kB) | Preview

Export

Downloads

Downloads per month over past year

View more statistics

Actions (login required)

Admin Login Admin Login