Chronic inflation and the importance of the exchange rate as a nominal anchor for the domestic price level have led some Latin American countries to consider returning to a fixed dollar exchange rate. John Welch and Darryl McLeod examine the costs and benefits of real exchange rate movements and...

An analysis of how central-bank exchange-market intervention can affect both the level of exchange rates and the risk premium in asset returns, showing how the risk premium is related to the conditional variances of intervention and other exogenous processes.