The objective of this paper is to study the various possible exchange rate strategies and its applications.For that,we use a game theoretical approach,first with a finite horizon,second with an infinite one.Two strate...The objective of this paper is to study the various possible exchange rate strategies and its applications.For that,we use a game theoretical approach,first with a finite horizon,second with an infinite one.Two strategies are possible (“weak” and “strong”).Depending on the time horizon,the equilibrium solution leads to two main implications.First,in the finite horizon case,an optimal Pareto solution can only be attained if both players mutually agree not on disrupt each other’s expectations on the exchange rate.Secondly,in the infinite horizon situation,it is the interest of each player to address a clear and strong signal to the other about its own strategy.These results have some important policy implications.展开更多
文摘The objective of this paper is to study the various possible exchange rate strategies and its applications.For that,we use a game theoretical approach,first with a finite horizon,second with an infinite one.Two strategies are possible (“weak” and “strong”).Depending on the time horizon,the equilibrium solution leads to two main implications.First,in the finite horizon case,an optimal Pareto solution can only be attained if both players mutually agree not on disrupt each other’s expectations on the exchange rate.Secondly,in the infinite horizon situation,it is the interest of each player to address a clear and strong signal to the other about its own strategy.These results have some important policy implications.
