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Foreign Exchange Intervention in Colombia
Inflation Targeting and Exchange Rate Management In Less Developed Countries
Author: Mr.Marco Airaudo
Publisher: International Monetary Fund
Published: 2016-03-08
Total Pages: 65
ISBN-13: 1475523165
DOWNLOAD EBOOK →We analyze coordination of monetary and exchange rate policy in a two-sector model of a small open economy featuring imperfect substitution between domestic and foreign financial assets. Our central finding is that management of the exchange rate greatly enhances the efficacy of inflation targeting. In a flexible exchange rate system, inflation targeting incurs a high risk of indeterminacy where macroeconomic fluctuations can be driven by self-fulfilling expectations. Moreover, small inflation shocks may escalate into much larger increases in inflation ex post. Both problems disappear when the central bank leans heavily against the wind in a managed float.
Evolving Monetary Policy Frameworks in Low-Income and Other Developing Countries
Author: International Monetary Fund
Publisher: International Monetary Fund
Published: 2015-10-23
Total Pages: 74
ISBN-13: 1498344062
DOWNLOAD EBOOK →Over the past two decades, many low- and lower-middle income countries (LLMICs) have improved control over fiscal policy, liberalized and deepened financial markets, and stabilized inflation at moderate levels. Monetary policy frameworks that have helped achieve these ends are being challenged by continued financial development and increased exposure to global capital markets. Many policymakers aspire to move beyond the basics of stability to implement monetary policy frameworks that better anchor inflation and promote macroeconomic stability and growth. Many of these LLMICs are thus considering and implementing improvements to their monetary policy frameworks. The recent successes of some LLMICs and the experiences of emerging and advanced economies, both early in their policy modernization process and following the global financial crisis, are valuable in identifying desirable features of such frameworks. This paper draws on those lessons to provide guidance on key elements of effective monetary policy frameworks for LLMICs.
Market Volatility and Foreign Exchange Intervention in EMEs
Author: Banco de Pagos Internacionales (Basilea, Suiza). Departamento Monetario y Económico
Publisher:
Published: 2013
Total Pages: 0
ISBN-13: 9789291319626
DOWNLOAD EBOOK →Conditionality in Evolving Monetary Policy Regimes
Author: International Monetary Fund
Publisher: International Monetary Fund
Published: 2014-05-03
Total Pages: 61
ISBN-13: 1498343694
DOWNLOAD EBOOK →With single-digit inflation and substantial financial deepening, developing countries are adopting more flexible and forward-looking monetary policy frameworks and ascribing a greater role to policy interest rates and inflation objectives. While some countries have adopted formal inflation targeting regimes, others have developed frameworks with greater target flexibility to accommodate changing money demand, use of policy rates to signal the monetary policy stance, and implicit inflation targets.
Foreign Exchange Intervention Rules for Central Banks: A Risk-based Framework
Author: Romain Lafarguette
Publisher: International Monetary Fund
Published: 2021-02-12
Total Pages: 33
ISBN-13: 1513569406
DOWNLOAD EBOOK →This paper presents a rule for foreign exchange interventions (FXI), designed to preserve financial stability in floating exchange rate arrangements. The FXI rule addresses a market failure: the absence of hedging solution for tail exchange rate risk in the market (i.e. high volatility). Market impairment or overshoot of exchange rate between two equilibria could generate high volatility and threaten financial stability due to unhedged exposure to exchange rate risk in the economy. The rule uses the concept of Value at Risk (VaR) to define FXI triggers. While it provides to the market a hedge against tail risk, the rule allows the exchange rate to smoothly adjust to new equilibria. In addition, the rule is budget neutral over the medium term, encourages a prudent risk management in the market, and is more resilient to speculative attacks than other rules, such as fixed-volatility rules. The empirical methodology is backtested on Banco Mexico’s FXIs data between 2008 and 2016.
Inflation Targeting and Financial Stability
Author: Pierre-Richard Agénor
Publisher:
Published: 2013
Total Pages: 120
ISBN-13: 9781597821711
DOWNLOAD EBOOK →Central Banking in Latin America
Author: Mr.Luis Ignacio Jácome
Publisher: International Monetary Fund
Published: 2015-03-17
Total Pages: 57
ISBN-13: 1484303180
DOWNLOAD EBOOK →This paper provides a brief historical journey of central banking in Latin America to shed light on the debate about monetary policy in the post-global financial crisis period. The paper distinguishes three periods in Latin America’s central bank history: the early years, when central banks endorsed the gold standard and coped with the collapse of this monetary system; a second period, in which central banks turned into development banks under the aegis of governments at the expense of increasing inflation; and the “golden years,” when central banks succeeded in preserving price stability in an environment of political independence. The paper concludes by cautioning against overburdening central banks in Latin America with multiple mandates as this could end up undermining their hard-won monetary policy credibility.
Unveiling the Effects of Foreign Exchange Intervention
Author: Gustavo Adler
Publisher: International Monetary Fund
Published: 2015-06-23
Total Pages: 42
ISBN-13: 1513534602
DOWNLOAD EBOOK →We study the effect of foreign exchange intervention on the exchange rate relying on an instrumental-variables panel approach. We find robust evidence that intervention affects the level of the exchange rate in an economically meaningful way. A purchase of foreign currency of 1 percentage point of GDP causes a depreciation of the nominal and real exchange rates in the ranges of [1.7-2.0] percent and [1.4-1.7] percent respectively. The effects are found to be quite persistent. The paper also explores possible asymmetric effects, and whether effectiveness depends on the depth of domestic financial markets.
