Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/70438
Authors: 
Basu, Kaushik
Year of Publication: 
2009
Series/Report no.: 
CAE Working Paper 09-02
Abstract: 
Central banks in developing countries, wanting to devalue the domestic currency, usually intervene in the foreign exchange market by buying up foreign currency using domestic money-often backing this up with sterilization to counter inflationary pressures. Such interventions are usually effective in devaluing the currency but lead to a build up of foreign exchange reserves beyond what the central bank may need. The present paper analyzes the mechanics of such central bank interventions and, using techniques of industrial organization theory, proposes new kinds of interventions which have the same desired effect on the exchange rate, without causing a build up of reserves.
Subjects: 
exchange rate
oligopoly theory
central bank intervention
foreign exchange dealers
India
JEL: 
L31
D43
F31
G20
Document Type: 
Working Paper

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