The following is a description of the paper and not the actual abstract. We assume that the central bank has been given a mandate to stabilize its exchange rate around a target, an objective it has to meet by trading against risk-averse speculators who have private information about future spot...

Using a portfolio balance model of exchange rate determination, this paper develops a theoretical explanation of why central banks do not make precise announcements of their exchange rate targets. In foreign exchange markets, where it is common knowledge that the central bank intervenes to...