| Summary: | 碩士 === 中原大學 === 國際貿易研究所 === 99 === Due to the high interdependence among countries and the spill-over effects of central bank’s intervention, the traditional exchange rate target zone model, proposed by Krugman (1991), cannot explain the co-existence of multilateral economic relationships reasonably. To resolve the problem this paper extends the multilateral exchange rate target zones model, constructed by Serrat (2000), by considering government’s expenditure policy and the intervention behavior of central bank which are two important factors in economic development. Regarding fundamentals as the process of the expected inflation rate, this study applies the optimal control and the game theory to derive the effects of government expenditures and central bank’s intervention on exchange rate target zones.
The theoretical derivation shows that the key factor affecting the dynamic path of exchange rate is the choice of coordination with the third country. In addition, the change of cooperative partners, the incompleteness of central bank’s creditability, and the ambiguousness of governmental policy, may make exchange rate display a jump and nonlinear path straightforwardly. However, when the interdependence between central bank’s intervention and governmental policy exists, the possibility of unstable exchange rate target zones and economic system will increase, i.e., the honeymoon effect is controversial. In other words, the signal channel and the coordination channel of central bank’s intervention play an important role in stabilizing exchange rate volatility in multilateral exchange rate target zones model.
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