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The Sustainability of Sterilization Policy

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Publication Date:

Publisher(s): Center for Economic and Policy Research

Author(s): Roberto Frenkel

Topic: Banking and finance (Central banks)

Keywords: Argentina; Trilemma; Exchange rate

Type: Report

Coverage: United States

Abstract:

This paper looks at the conditions under which a central bank can target its exchange rate and still be able to afford to "sterilize" the central bank's interventions in the foreign exchange markets. The paper, by economist Roberto Frenkel, finds that such policy is sustainable under a fairly broad array of policy conditions and targets. This has important implications for central bank policy.