Why is Managed Floating Adopted as a De Facto Exchange Rate Regime?

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Abstract

This paper examines the welfare implications of the managed floating as an intermediate regime. Modifying and generalizing the Hamada's model (2002) to accommodate intervention policy, we compare the expected losses under three alternative regimes; freely floating, pegged exchange rate, and managed floating. We show that, with some restrictive conditions, the welfare level of a small country under the managed floating regime is possibly higher than that under other regimes. This is because the private sector misconceives the exchange rate regime that the central bank actually selects. This partly explains why managed floating is widely adopted as a de facto regime.

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Details 詳細情報について

  • CRID
    1572824501793916928
  • NII Article ID
    110004629266
  • NII Book ID
    AA1188120X
  • Text Lang
    en
  • Data Source
    • CiNii Articles

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