抄録
This paper investigates a new welfare implication of foreign exchange market intervention under time-consistent monetary policy. When the monetary authority can observe nominal exchange rate instantaneously, there exists an incentive to intervene in foreign exchange market. However, the lower degree of intervention reduces the temptation for the monetary authority to generate unanticipated inflation. Hence, a rise in the variance of import shocks which reduces the degree of intervention might raise the social welfare in a Nash equilibrium. Furthermore, because of these endogenous intervention rules, the gains from coordination depend on the relative magnitude of various exogenous variabilities.
