Presented by Charles I. Plosser, President and Chief Executive Officer, Federal Reserve Bank of Philadelphia, World Affairs Council of Philadelphia, February 17, 2010

A country's financial system is internationally illiquid if its potential short-term obligations in foreign currency exceed the amount of foreign currency it can have access to in short notice. This condition may be necessary and sufficient for financial crises and/or exchange rate collapses...

This article first reviews methods of foreign exchange intervention and then presents evidence - focusing on survey results - on the mechanics of such intervention. Types of intervention, instruments, timing, amounts, motivation, secrecy and perceptions of efficacy are discussed.

This paper uses Whiteman's(1986) frequency-domain optimization methodology to parameterize the precommitment period in a standard rational expectations policy design model. This allows researchers to adopt an empirical approach to the time consistency issue. That is, the operative commitment...