Year: 1989
Type: article
Abstract: We show that some classes of sterilized interventions have no effect on equilibrium prices and quantities. The proof does not require complete markets, Ricardian equivalence, monetary neutrality, or the law of one price. Moreover, regressions of exchange rates or interest differentials on variables measuring debt's currency composition contain no information about the affectiveness of such interventions. Other interventions require changes in monetary and fiscal policy; their effects depend, generally, on the influence of these changes on the economy and not on the intervention alone. In short, sterilized intervention is not, as the portfolio balance approach indicates, an extra policy instrument.
Source: Journal of Monetary Economics
Authors: David K. Backus, Patrick J. Kehoe
Institutions: Federal Reserve Bank of Minneapolis, University of Minnesota
Language: English
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W1595413885