This paper analyses the exchange rate policy of a central bank facing conflicting objectives and given the assumption of imperfect information of private agents about its priorities. We put forward the potential for the manipulation of expectations by an opportunistic central bank which undertakes seemingly contradictory policies. As a result, a devaluation risk premium may push up interest rates and entail a depressing effect on output.
BESANCENOT, D., VRANCEANU, R. and WARIN, T. (1997). Crédibilité de la politique de change et UEM.