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Title: |
Foreign Exchange Intervention for Internal
Balance |
| Author: |
Kim, Kyung Soo |
| Author
Affiliation: |
Sungkyunkwan U |
| Source: |
International Economic Journal, Winter 2000, v. 14, no. 4, pp. 59-75 |
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Publication Date: |
Winter 2000 |
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Abstract: |
This paper is concerned with the optimal
combination of sterilization and wage indexation in a small open economy
subject to various disturbances. In most cases the effects of these
policy instruments are interdependent such that they act like a single
instrument. At the optimum, in addition to the well-known
substitutability of foreign exchange intervention and wage indexation,
the complementarity of foreign exchange intervention and sterilization
is obtained. The relationship between the degree of capital mobility and
the optimal combination of the policy instruments is also examined. |
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