Essays on Speculative Attacks and Exchange Rate Target Zones
Galindo, Arturo Jose
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https://hdl.handle.net/2142/85645
Description
Title
Essays on Speculative Attacks and Exchange Rate Target Zones
Author(s)
Galindo, Arturo Jose
Issue Date
1999
Doctoral Committee Chair(s)
Esfahani, Hadi S.
Department of Study
Economics
Discipline
Economics
Degree Granting Institution
University of Illinois at Urbana-Champaign
Degree Name
Ph.D.
Degree Level
Dissertation
Keyword(s)
Economics, General
Language
eng
Abstract
Chapter Three develops a model of exchange rate fluctuations in a target zone with a crawling central parity. The goal is to explain the behavior of exchange rates in target zones when the central parity is allowed to depreciate. The setup is used to show the importance of having a coordinated monetary and exchange rate policy. In particular it is shown that if the growth rate of domestic credit exceeds the rate of crawl of the band, expectations of future reserve depletion can arise, and the exchange rate's distribution inside the target zone concentrates more of its mass in the upper half of the band. The paper also provides an explanation of why attempts to decrease speculative pressure by increasing the rate of crawl are usually unsuccessful.
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