02047cas a2200241 a 4500 AALejournalIMF010571 230101c9999 xx r poo 0 0eng d 15.00 USD 9781451947496 1020-7635 BD-DhAAL BD-DhAAL International Monetary Fund. Research Dept. IMF Staff papers : Volume 23 No. 2. Washington, D.C. : International Monetary Fund, 1976. 1 online resource (214 pages) IMF Staff Papers <strong>Off-Campus Access:</strong> No User ID or Password Required <strong>On-Campus Access:</strong> No User ID or Password Required Electronic access restricted to authorized BRAC University faculty, staff and students This paper provides the nexus between short-term interest rates, private monetary capital flows, and the exchange rate under managed floating. It questions the belief held by many economists that capital flows necessarily have benign effects that prevent large erratic movements in the exchange rate from taking place. The approach employed in the study is to specify a model of the balance of payments of the Federal Republic of Germany including the demand for and the supply of base money as well as policy reaction functions explaining the central bank net demand for domestic assets (monetary policy) and foreign assets (intervention policy). The major finding of the study is that the experience of the Federal Republic of Germany with floating does not bear out the faith that many economists have had in the stabilizing role of short-term capital flows. Relatively small variations in the interest rate differential between Frankfurt and the Euro-dollar market have led to large fluctuations in the exchange rate. Mode of access: Internet IMF Staff Papers; IMF Staff Papers ; No. 1976/002 Full text available on IMF http://elibrary.imf.org/view/journals/024/1976/002/024.1976.issue-002-en.xml IMF e-Library