A note on interest rate defense policy and exchange rate volatility

SHIU-SHENG CHEN; SHIU-SHENG CHEN;Chen, Shiu-Sheng;Chen, Shiu-Sheng

doi:10.1016/j.econmod.2007.02.002

A note on interest rate defense policy and exchange rate volatility

Resource

Economic Modelling, 24(5), 768-777

Journal

Economic Modelling

Journal Volume

24

Journal Issue

5

Pages

768-777

Date Issued

2007

Author(s)

SHIU-SHENG CHEN

DOI

10.1016/j.econmod.2007.02.002

URI

http://www.scopus.com/inward/record.url?eid=2-s2.0-34250683446&partnerID=MN8TOARS

http://scholars.lib.ntu.edu.tw/handle/123456789/334292

Abstract

In this paper, the effectiveness of an interest rate defense policy is investigated theoretically. Chen [Chen, Shiu-Sheng, 2006. Revisiting the interest rate-exchange rate nexus: a Markov switching approach. Journal of Development Economics 79 (1), 208-224] has documented an empirical regularity that higher interest rates are associated with higher exchange rate volatility. In order to account for the empirical findings, a simple theoretical model by incorporating interest rate rules in a noise trader model is proposed. © 2007 Elsevier B.V. All rights reserved.

SDGs

[SDGs]SDG17

Type

journal article

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13.pdf

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24.11 KB

Format

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(MD5):dd8648c244ec965c61287f37f5fd0c1e

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A note on interest rate defense policy and exchange rate volatility

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