Showing papers on "Forward exchange rate published in 1961"
TL;DR: The authors examines the extent to which monetary authorities might operate to good advantage in the forward exchange market, arguing that appropriate official forward intervention assists in the reconciliation of conflicts between internal and external balance.
Abstract: THIS PAPER examines the extent to which our monetary authorities might operate to good advantage in the forward exchange market. The central thesis is that appropriate official forward intervention assists in the reconciliation of conflicts between internal and external balance. Within limits, the monetary authorities, through their influence on the forward exchange rate, can establish two short-term rates of interest. One rate applies to foreign lenders, the other to domestic lenders. As a consequence, monetary ease at home can proceed without encouraging the withdrawal of short-term money sensitive to international yield differentials. On the other hand, monetary restraint can be practiced without attracting short-term money from abroad and possibly enforcing an unwarranted restriction there. Whether it is desirable that the amount and frequency of short-term capital movements between countries be diminished in this fashion is debatable; it will be argued here that the resulting independence for monetary policy is worthwhile. No novelty is claimed for the suggestion that forward operations be added to the more conventional tools of monetary policy. Keynes discussed the matter in his Treatise on Money' and the merits of forward intervention were further analyzed in the literature prior to World War IJJ2 However, the theory and practice of forward exchange have, until just recently, been neglected topics. Forward exchange rates were not even mentioned explicitly in the International
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