Optimal Central Bank intervention in the foreign exchange market
type: Item
instance of: scholarly article
title: Optimal Central Bank intervention in the foreign exchange market
zbMATH Open document ID: 0998.91041
author: Abel Cadenillas
author: Fernando Zapatero
published in: Journal of Economic Theory
publication date: 1999-11-11T00:00:00Z
review text: This paper studies the problem of optimally controlling an exchange rate to keep it close to a given target. There are both a running cost for deviations from the target and fixed and proportional costs for each intervention. The controlled process behaves like a geometric Brownian motion between interventions which are of impulse control type. The authors show how to construct an optimal control from a solution of the quasi-variational inequalities for this problem, construct a solution to the quasi-variational inequalities and numerically provide some comparative statics.
reviewed by: Martin Schweizer
Mathematics Subject Classification ID: 91B64
Mathematics Subject Classification ID: 93E20
Mathematics Subject Classification ID: 49J40
zbMATH DE Number: 1348016
zbMATH Keywords: impulse control
zbMATH Keywords: exchange rate
zbMATH Keywords: central bank
zbMATH Keywords: intervention
zbMATH Keywords: quasi-variational inequalities
MaRDI profile type: Publication
full work available at URL: jeth.1999.2523
OpenAlex ID: W1982644477
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DOI: 10.1006/JETH.1999.2523
description: scientific article; zbMATH DE number 1348016