Optimal Central Bank intervention in the foreign exchange market

• 成果类型: Article
• 署名作者: Cadenillas, A; Zapatero, F
• 署名单位: University of Alberta; University of Southern California
• 刊物名称: JOURNAL OF ECONOMIC THEORY
• ISSN/ISSBN: 0022-0531
• DOI: 10.1006/jeth.1999.2523
• 发表日期: 1999
• 页码: 218-242
• 关键词: Exchange rate; quasi-variational inequalities; stochastic impulse controls; Stochastic Differential Equations; stopping times

摘要

We consider a currency with exchange rate dynamics modeled as a geometric Brownian motion. The objective of the Central Bank is to keep this exchange rate as close as possible to a given target, so there is a running cost associated to the difference between the exchange rate and the target. Additionally, there are also fixed and proportional costs associated with each intervention. The objective of this paper is to iind the optimal level of intervention, and the optimal sizes of the interventions. so as to minimize the total cost. We solve this problem by applying the theory of stochastic impulse controls. Journal of Economic Literature Classification Numbers: C61, D81, F31, G15. (C) 1999 Academic Press.