Affordable Access

Asymmetric Central Bank Reaction Functions: An Application of Smooth Transition Regression.

  • Political Science


This paper estimates a simple model of exchange rate policy where the Central Bank optimises an objective function which takes into account competitiveness, its commitment to the EMU and the cost of adjustment. We allow for asymmetry in government behaviour whereby a key paremeter, the marginal adjustment cost of the effective exchange rate, takes on a continuum of values depending on the value of the DeutscheMark/Irish pound exchange rate.

There are no comments yet on this publication. Be the first to share your thoughts.