Target Zones and Stabilization of Exchange Rates

• Main Authors: YANN-HWA DUH, 杜燕華
• Other Authors: 施能仁
• Format: Others
• Language: zh-TW
• Published: 2002
• Online Access: http://ndltd.ncl.edu.tw/handle/33610654269858417277

碩士 === 國立彰化師範大學 === 商業教育學系在職進修專班 === 91 === Abstract Stabilizing commodity prices and exchange rate are one of the important policies in most countries; Krugman (1991) develops a simple model of exchange rate behavior under a target zone regime. It shows that the expectation that monetary policy will be adjusted to a limit exchange rate variation affects exchange rate behavior even when the exchange rate lies inside the zone and is thus not being defended actively. This paper presents first a pedagogical exposition to re-explain the stabilizing effect of exchange rate target zones as described in Krugman Finally, this paper tries to analyze whether the “honeymoon effect” is present when the commodity market equation consider the expected inflation rate. In addition, it investigate if the exchange rate had been stabilized when the commodity price was targeted in stead of exchange rate being targeted .We find that the “honeymoon effect” may not exist.