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Why Exchange Rate Bands?: Monetary Independence in Spite of Fixed Exchange Rates
Stockholm University, Faculty of Social Sciences, Institute for International Economic Studies.
1992 (English)Report (Other academic)
Abstract [en]

The paper argues that the reason world fixed exchange rate regimes usually have finite bands instead of completely fixed exchange rates between realignments is that exchange rate bands, counter to the textbook result, give central banks some monetary independence, even with free international capital mobility. The nature and amount of monetary independence is specified, informally and in a formal model, and quantified with Swedish krona data. Altogether the amount of monetary independence appears sizeable. For instance, an increase in the Swedish krona band from zero to about ±2 percent may reduce krona interest rate's standard deviation by about 1/2.

Place, publisher, year, edition, pages
Stockholm: IIES , 1992. , 57 p.
Series
Seminar Paper / Institute for International Economic Studies, Stockholm University, ISSN 0347-8769 ; 521
Keyword [en]
target zones, interest rates, monetary policy, mean reversion
National Category
Economics
Identifiers
URN: urn:nbn:se:su:diva-41839OAI: oai:DiVA.org:su-41839DiVA: diva2:337935
Available from: 2010-08-10 Created: 2010-08-10 Last updated: 2010-08-10Bibliographically approved

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Svensson, Lars E.O.
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CiteExportLink to record
Permanent link

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Cite
Citation style
  • apa
  • ieee
  • modern-language-association-8th-edition
  • vancouver
  • Other style
More styles
Language
  • de-DE
  • en-GB
  • en-US
  • fi-FI
  • nn-NO
  • nn-NB
  • sv-SE
  • Other locale
More languages
Output format
  • html
  • text
  • asciidoc
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