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Exchange Rate Intervention and Degree of Openness |
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| รหัสดีโอไอ | |
| Creator | Wanakiti Wanasijp |
| Title | Exchange Rate Intervention and Degree of Openness |
| Publisher | School of Development Economic |
| Publication Year | 2557 |
| Journal Title | Development Economic Review |
| Journal Vol. | 8 |
| Journal No. | 1 |
| Page no. | 10 |
| Keyword | Exchange Rate Intervention, Degree of Openness, General Equilibrium |
| ISSN | 1906-2540 |
| Abstract | Since most of existing literature analyses exchange rate intervention in a partial equilibrium framework, implying that the spillover effect of the intervention on other sectors is ignored, in this paper, however, the problem will be posed under general equilibrium setting in which the spillover effect of exchange rate intervention will be taken into account. Using degree of openness as a proxy for the spillover effect of exchange rate intervention, it is postulated that, with high degree of openness, the spillover effect of the intervention is beneficial since it will further help stabilizing the whole economy. Hence, with high degree of openness, the optimal exchange rate band to be narrower than the one with low degree of openness, signifying the central bank's bias toward more intervention rather than floating of exchange rate. With high degree of openness, large portion of GDP is accounted for by international trade transactions. Therefore, stabilizing international trade sector via exchange rate intervention will have positive spillover effect by helping to further stabilize the whole economy. Exchange rate intervention should be, therefore, beneficial for a country in which degree of openness is relatively high. |
