NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Monetary Policy Under Dual Exchange Rates

Robert E. Cumby

NBER Working Paper No. 1424
Issued in August 1984
NBER Program(s):   ITI   IFM

This paper finds that the introduction of dual exchange rates gives the monetary authority greater independence from external constraints than it would otherwise enjoy. The monetary authority is able to influence the level of aggregate demand in the short run and to sterilize the effects of temporary foreign distrubances. In addition, the paper finds that dual rates insulate the domestic economy fully from foreign interest rate changes but do not provide insulation from speculative disturbances.

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Document Object Identifier (DOI): 10.3386/w1424

Published: Journal of International Money and Finance, vol. 3, no. 2, ppp. 195-208, August 1984. citation courtesy of

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