Series: IMF Working Papers
Author(s): Juan Sole
Publisher: INTERNATIONAL MONETARY FUND
Publication Date: 01 May 2004
Keywords: bond, central bank, bonds, domestic currency, interest rate policy, Open Economy Macroeconomics,
This paper studies a policy often used to defend a currency peg: raising short-term interest rates. The rationale for this policy is to stem demand for foreign reserves. Yet, this mechanism is absent from most mone...