Rational Speculative Bubbles in an Exchange Rate Target Zone

Rational Speculative Bubbles in an Exchange Rate Target Zone
Author :
Publisher :
Total Pages : 60
Release :
ISBN-10 : UCSD:31822005240742
ISBN-13 :
Rating : 4/5 ( Downloads)

Book Synopsis Rational Speculative Bubbles in an Exchange Rate Target Zone by : Willem H. Buiter

Download or read book Rational Speculative Bubbles in an Exchange Rate Target Zone written by Willem H. Buiter and published by . This book was released on 1990 with total page 60 pages. Available in PDF, EPUB and Kindle. Book excerpt: The recent theory of exchange rate dynamics within a target zone holds that exchange rates under a currency bard are less responsive to fundamental shocks than exchange rates under a free float, provided that the intervention rules of the Central Bank(s) are common knowledge. These results are derived after having assumed a priori that excess volatility due to rational bubbles does not occur in the foreign exchange market. In this paper we consider instead a setup in which the existence of speculative behavior is a datum the Central Bank has to deal with. We show that the defense of the target zone in the presence of bubbles is viable if the Central Bank accommodates speculative attacks when the latter are consistent with the survival of the target zone itself and expectations are self-fulfilling. These results hold for a large class of exogenous and fundamental-dependent bubble processes. We show that the instantaneous volatility of exchange rates within a bard is not necessarily less than the volatility under free float and analyze the implications for interest rate differential dynamics.


Rational Speculative Bubbles in an Exchange Rate Target Zone Related Books

Rational Speculative Bubbles in an Exchange Rate Target Zone
Language: en
Pages: 60
Authors: Willem H. Buiter
Categories: Commerce
Type: BOOK - Published: 1990 - Publisher:

GET EBOOK

The recent theory of exchange rate dynamics within a target zone holds that exchange rates under a currency bard are less responsive to fundamental shocks than
Fiscal Federalism in Theory and Practice
Language: en
Pages: 1146
Authors: Mrs.Teresa Ter-Minassian
Categories: Business & Economics
Type: BOOK - Published: 1997-09-10 - Publisher: International Monetary Fund

GET EBOOK

Over the past few decades, a clear trend has emerged worldwide toward the devolution of spending and, to a lesser extent, revenue-raising responsibilities to st
Rational Bubbles
Language: en
Pages: 270
Authors: Matthias Salge
Categories: Business & Economics
Type: BOOK - Published: 2012-12-06 - Publisher: Springer Science & Business Media

GET EBOOK

3 On the Economic Relevance of Rational Bubbles 79 3. 1 Capital markets . . . . . . . . . 80 3. 1. 1 Efficient capital markets 86 3. 1. 2 Rational bubbles on ca
Exchange Rate Economics
Language: en
Pages: 334
Authors: Ronald MacDonald
Categories: Foreign exchange
Type: BOOK - Published: 2005 - Publisher: Routledge

GET EBOOK

''In summary, the book is valuable as a textbook both at the advanced undergraduate level and at the graduate level. It is also very useful for the economist wh
Handbook of International Economics
Language: en
Pages: 904
Authors: G.M. Grossman
Categories: Business & Economics
Type: BOOK - Published: 1995-12-13 - Publisher: Elsevier

GET EBOOK

This reference accords recognition to the recent revolution in macroeconomics wrought by imperfect competition. Grossman and Rogoff (Princeton U.) present chapt