Exchange Rate Policies at the Zero Lower Bound

• 成果类型: Article
• 署名作者: Amador, Manuel; Bianchi, Javier; Bocola, Luigi; Perri, Fabrizio
• 署名单位: University of Minnesota System; University of Minnesota Twin Cities; Federal Reserve System - USA; Federal Reserve Bank - Minneapolis; National Bureau of Economic Research; Stanford University; Center for Economic & Policy Research (CEPR)
• 刊物名称: REVIEW OF ECONOMIC STUDIES
• ISSN/ISSBN: 0034-6527
• DOI: 10.1093/restud/rdz059
• 发表日期: 2020
• 页码: 1605-1645
• 关键词: liquidity; MARKET; Currency

摘要

We study the problem of a monetary authority pursuing an exchange rate policy that is inconsistent with interest rate parity because of a binding zero lower bound constraint. The resulting violation in interest rate parity generates an inflow of capital that the monetary authority needs to absorb by accumulating foreign reserves. We show that these interventions by the monetary authority are costly, and we derive a simple measure of these costs: they are proportional to deviations from the covered interest parity (CIP) condition and the amount of accumulated foreign reserves. Our framework can account for the recent experiences of safe-haven currencies and the sign of their observed deviations from CIP.