Comment on J. Williamson, “Exchange Rate Flexibility and Reserve Use”
John Williamson’s paper investigates the trade-off between flexibility of exchange rates and the degree of intervention by authorities in exchange markets. The first part of the paper tries to measure the degree of use of official reserves before and after floating. The second part looks at the trade-off between variance in the exchange rate and variance of intervention in a stochastic theoretical model of the exchange market.
KeywordsExchange Rate Current Account Conditional Expectation Exchange Market Rational Expectation
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