Abstract
A leaning-against-the wind intervention that has only a temporary effect on the exchange rate and that is not too aggressive can be shown analytically to yield positive expected profits to a central bank even when the exchange-rate process is non-stationary. These profits arise if there are some transitory shocks to the exchange rate. Furthermore, very aggressive intervention will yeild positive expected profits eventually when there is a tendency for exchange rates to return to a long-run equilibrium level.
Keywords
Banks
Tech Report Number
1994-009
Date of this Version
1994
Recommended Citation
Carlson, John A. and Kim, Insook, "Leaning Against the Wind: Do Central Banks Necessarily Lose?" (1994). Purdue CIBER Working Papers. Paper 86.
https://docs.lib.purdue.edu/ciberwp/86
COinS