Monetary Policy Under Dual Exchange Rates

38 Pages Posted: 18 Jun 2004

See all articles by Robert E. Cumby

Robert E. Cumby

Georgetown University - Department of Economics; National Bureau of Economic Research (NBER)

Date Written: August 1984


This paper finds that the introduction of dual exchange rates gives the monetary authority greater independence from external constraints than it would otherwise enjoy. The monetary authority is able to influence the level of aggregate demand in the short run and to sterilize the effects of temporary foreign distrubances. In addition, the paper finds that dual rates insulate the domestic economy fully from foreign interest rate changes but do not provide insulation from speculative disturbances.

Suggested Citation

Cumby, Robert E., Monetary Policy Under Dual Exchange Rates (August 1984). NBER Working Paper No. w1424. Available at SSRN:

Robert E. Cumby (Contact Author)

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