Exchange Rate Target Zone in an Open Economy: Learning Stability and Policy Effectiveness

• Main Authors: Liu, Yihsuan, 劉懿萱
• Other Authors: Lin, Yolong
• Format: Others
• Language: zh-TW
• Published: 2011
• Online Access: http://ndltd.ncl.edu.tw/handle/38s92b

碩士 === 國立暨南國際大學 === 經濟學系 === 99 === This paper aims to explore whether, in an open economy, a country’s exchange rate target zone policy can achieve its steady state value in long term, and to analyze the effects of exchange rate policy on the real interest rates, output gap and unemployment rates. I construct a symmetric two-country model, and introduce the concept of adaptive learning in my model. Assuming that governments rationally expect the behavior of agents, and agents adopt the way of bounded rationality, then, we can obtain the exchange rate target zone policy of the government of the long term steady state. This paper also examines the interaction of monetary policy between the two countries. I will analyze this issue under coordination, non-coordination, and leader-follower, and find out the stability conditions of the exchange rate target zone policy long term stable conditions. Moreover, this study introduces the concept of minima-state-variation rational expectation equilibrium, MSVREE, to examine whether the long-term equilibrium of the real exchange rate would be achieved where people face the exchange rate band policy and make decisions by applying the adaptive learning process.