Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/277142 
Year of Publication: 
2008
Citation: 
[Journal:] Intervention. European Journal of Economics and Economic Policies [ISSN:] 2195-3376 [Volume:] 05 [Issue:] 2 [Year:] 2008 [Pages:] 387-405
Publisher: 
Metropolis-Verlag, Marburg
Abstract: 
The paper develops a three-asset-portfolio model to analyse consequences of foreign exchange market operations by Asian central banks on the exchange rates between euro, dollar and an Asian currency. It is found that - contrary to public belief - the purchase of dollar assets by Asian central banks strengthens the dollar against both the euro and the Asian currency. A diversification of Asian central bank reserves from dollar into euro would weaken the dollar against both other currencies. Thus, such a diversification would be incompatible with Asian currency pegs. However, it is shown that Asian central banks could alter their relative portfolio composition while keeping the peg intact if they shifted from intervening against the dollar into intervening against the euro.
Subjects: 
foreign exchange interventions
exchange rates
revived Bretton-Woods-System
JEL: 
F31
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by Logo
Document Type: 
Article

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