The paper argues that the reason real world fixed exchange rate regimes usually have finite bands instead of completely fixed exchange rates between realignments is that exchange rate bands, counter to the textbook result, give central banks some monetary independence, even with free...

This paper studies the fluctuations of foreign exchange reserves under a regime of credibly fixed exchange rates. The paper considers a variety of assumptions on the determinants of money demand and currency substitution

The traditional approach to the estimation of the offset and sterilization equations can be criticized for the ad-hoc specification of the reaction function of the monetary authorities and the endogeneity of the domestic credit and foreign reserve variables in the estimated equations. The paper...

In veiw of recent strong evidence that substantial sterilization of the monetary effects of reserve flows occurs, a modified monetary approach model is formulated in which central banks exercise no control over their domestic money supply despite their sterilization activities. This model is...

For more than a decade before the great crisis of 1997-98, East Asian countries pegged softly to the U.S. dollar. In the period of currency chaos from mid 1997 through 1998 with exchange depreciations in eight East Asian countries, massive deflationary pressure in dollar terms which was...

Before the crisis of 1997-98, the East Asian economies except for Japan but including China pegged their currencies to the U.S. dollar. To avoid further turmoil, the IMF now argues that these currencies should float more freely. However, our econometric estimations show that the dollar's...

I study the pricing of American Depositary Receipts around FOMC meetings to identify the impact of US monetary policy on managed exchange rates. ADR investors assess the domestic central bank’s reluctance to maintain a currency peg regime if the costs of mimicking policy rate increases in the...