Author : Ricardo T. Fernholz
Publisher :
ISBN 13 :
Total Pages : 0 pages
Book Rating : 4.:/5 (137 download)
Book Synopsis Exchange Rate Manipulation and Constructive Ambiguity by : Ricardo T. Fernholz
Download or read book Exchange Rate Manipulation and Constructive Ambiguity written by Ricardo T. Fernholz and published by . This book was released on 2015 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: I consider dynamic models in which investors are heterogeneously informed about both foreign exchange interventions and exchange rate fundamentals and show that transparency sometimes exacerbates misalignment between the exchange rate and fundamentals. Although transparency reveals information about fundamentals, it also increases the precision of the exchange rate as a signal of those fundamentals that remain unknown (the signal-precision effect of transparency). If a central bank announcement reveals little information about fundamentals, then this effect dominates and transparency magnifies misalignment. One implication is that ambiguity can increase the effectiveness of intervention to support a declining currency during times of crisis.