To what degree do central banks sterilize the effects of capital flows on domestic money supply?
Under the current system of managed float exchange rates, large countries are able to absorb changes in their balance-of-payments by either manipulating international reserves to sterilize capital flows or by accepting changes in their exchange rates. In this system, the monetary authorities of the G7 countries have found it beneficial to sterilize capital flows thereby stabilizing their exchange rates and gaining greater control of their domestic money supply. Previous empirical work on the effects of sterilization were conducted using shortrun models on fixed exchange rates. Using the monetary approach to the balance-of-payments which emphasizes the money market from which balance-of-payments imbalances are derived, this article combines the current managed float system of exchange rates with cointegration techniques in considering the long-run relationship that has developed between the monetary base and money demand of the G7 countries from sterilized capital flows.
Year of publication: |
2000
|
---|---|
Authors: | Bernstein, David |
Published in: |
Applied Economics Letters. - Taylor & Francis Journals, ISSN 1350-4851. - Vol. 7.2000, 1, p. 15-19
|
Publisher: |
Taylor & Francis Journals |
Saved in:
freely available
Saved in favorites
Similar items by person
-
Judicial systems in transition economies : assessing the past, looking to the future
Anderson, James H., (2005)
-
Fringe benefits and small businesses: evidence from the federal reserve board small business survey
Bernstein, David, (2002)
-
Exchange market pressure during the current managed float
Bahmani-Oskooee, Mohsen, (1999)
- More ...