A MODEL OF INFLATION TRANSMISSION IN AN EXCHANGE RATE TARGET ZONE

2018 ◽  
Vol 70 (3) ◽  
pp. 285-297
Author(s):  
Kevin C. Chua
Keyword(s):  
Exchange Rate ◽  
Target Zone ◽  
Inflation Transmission

scholarly journals Exchange rate and interest rate distribution and volatility under the Portuguese target zone

2010 ◽  
Vol 57 (3) ◽  
pp. 261-282 ◽  
Author(s):  
Duarte Portugal ◽  
Sousa Andrade ◽  
Adelaide Duarte
Keyword(s):  
Exchange Rate ◽  
Interest Rate ◽  
Exchange Rate Volatility ◽  
European Monetary System ◽  
European Monetary ◽  
Target Zone ◽  
Rate Distribution ◽  
Economies In Transition ◽  
Portuguese Economy ◽  
The Exchange Rate

The aim of this study is to analyse the exchange rate and interest rate distribution and volatility under the participation of the Portuguese economy in the Exchange Rate Mechanism (ERM) of the European Monetary System (EMS) based on some of the main predictions of the target zone literature. Portugal adopted this exchange rate target zone from April 6 1992 until December 31 1998. During this period, the exchange rate distribution reveals that the majority of the observations lie close to the central parity, thus rejecting one of the key predictions of the Paul Krugman (1991) model. The analysis of the data also shows that exchange rate volatility tended to increase as the exchange rate approached the edges of the band, contrary to the predictions of the basic model. Interest rate differential volatility, on the other hand, seemed to behave in line with theoretical predictions. This suggests an increase in the credibility of monetary policy, allowing us to conclude that the adoption of a target zone has contributed decisively to the creation of the macroeconomic stability conditions necessary for the participation in the European Monetary Union (EMU). The Portuguese integration process should therefore be considered as an example to be followed by other small open economies in transition to the euro area.

scholarly journals EXCHANGE RATE FLEXIBILITY, CAPITAL MOBILITY AND INFLATION TRANSMISSION IN MALAYSIA

2009 ◽  
Vol 8 (1) ◽  
Author(s):  
Mansor H. Ibrahim
Keyword(s):  
Exchange Rate ◽  
Capital Mobility ◽  
Exchange Rate Regime ◽  
Flexible Exchange Rate ◽  
International Transmission ◽  
Exchange Rate Flexibility ◽  
The Us ◽  
Small Economy ◽  
Inflation Transmission ◽  
Limited Exchange

The paper assesses the international transmission of inflation for a small economy, Malaysia, over three sample periods marked by different degrees of exchange rate flexibility. Contradicting to conventional wisdom of less pronounced foreign nominal influences under the flexible exchange rate regime, this research finds evidence that the inflation transmission from the US to Malaysia is strongest during the period marked by increasing exchange rate flexibility (i.e. 1993-1998). This research also observes significant inflation effects of exchange rate depreciation during the same period. While this research observe less pronounced impacts of the US during the limited exchange rate flexibility period (i.e. 1988-1999), the US influences are virtually absent during the recent fixed regime (i.e. 1998-2005). This research believes that the intensity of capital flows across the three periods might have explained the results.

An analytical approximation of target zone exchange rate functions: the technique of collocation

1997 ◽  
Vol 57 (3) ◽  
pp. 339-343 ◽  
Author(s):  
Bernd Kempa ◽  
Michael Nelles ◽  
Christian Pierdzioch
Keyword(s):  
Exchange Rate ◽  
Analytical Approximation ◽  
Target Zone ◽  
Rate Functions
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