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Real Exchange Rate Targeting in Developing Countries
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.
Real Exchange Rate Targeting in Developing Countries
Macroeconomic Implications of Real Exchange Rate Targeting in Developing Countries
Author: Mr.Peter Montiel
Publisher: INTERNATIONAL MONETARY FUND
Published: 1991-03-01
Total Pages: 0
ISBN-13: 9781451844702
DOWNLOAD EBOOK →This paper analyzes the macroeconomic effects of a variety of exogenous and policy-induced real disturbances when the authorities target the level of the real exchange rate. It first discusses the implications--particularly for inflation and the current account--of targeting the rate at an “overdepreciated” level. The paper then examines the dynamic response of both output and inflation to a number of shocks. Further applications of the model, particularly as regards fiscal explanations of inflation, high-inflation plateaus, and money-based stabilization programs, are also considered.
Macroeconomic Implications of Real Exchange Rate Targeting in Developing Countries
Author: Peter J. Montiel
Publisher:
Published: 2006
Total Pages: 49
ISBN-13:
DOWNLOAD EBOOK →This paper analyzes the macroeconomic effects of a variety of exogenous and policy-induced real disturbances when the authorities target the level of the real exchange rate. It first discusses the implications particularly for inflation and the current account of targeting the rate at an quot;overdepreciatedquot; level. The paper then examines the dynamic response of both output and inflation to a number of shocks. Further applications of the model, particularly as regards fiscal explanations of inflation, high-inflation plateaus, and money-based stabilization programs, are also considered.
Credibility and Exchange Rate Management in Developing Countries
Author: Pierre-Richard Agénor
Publisher: International Monetary Fund
Published: 1991-09-01
Total Pages: 43
ISBN-13: 1451850921
DOWNLOAD EBOOK →The paper examines the role of credibility in the conduct of exchange rate policy in developing countries, The analysis is based on a model in which policymakers are concerned about inflation and external competitiveness. Price setters in the nontraded goods sector of the economy adjust prices in reaction to anticipated fluctuations in the domestic price of tradable goods. This type of model is showm to generate a “devaluation bias” which undermines the credibility of a fixed exchange rate. The effect of reputational factors, signaling considerations, and joining a currency union as possible solutions to this bias is examined.
Exchange Rate Policy in Developing Countries: Some Analytical Issues
Author: Bijan B. Aghevli
Publisher: World Bank Publications
Published: 1991-05-15
Total Pages: 50
ISBN-13:
DOWNLOAD EBOOK →This paper addresses analytical aspects of exchange rate policy and emphasizes the relationship among exchange rate flexibility, financial discipline, and international competitiveness.
Targeting the Real Exchange Rate
Author: Mr.Guillermo Calvo
Publisher: International Monetary Fund
Published: 1994-02-01
Total Pages: 50
ISBN-13: 1451921217
DOWNLOAD EBOOK →This paper presents a theoretical and empirical analysis of policies aimed at setting a more depreciated level of the real exchange rate. An intertemporal optimizing model suggests that, in the absence of changes in fiscal policy, a more depreciated level of the real exchange can only be attained temporarily. This can be achieved by means of higher inflation and/or higher real interest rates, depending on the degree of capital mobility. Evidence for Brazil, Chile, and Colombia supports the model’s prediction that undervalued real exchange rates are associated with higher inflation.
The Role of the Exchange Rate in Inflation-Targeting Emerging Economies
Author: Anna Nordstrom
Publisher: International Monetary Fund
Published: 2009-11-24
Total Pages: 106
ISBN-13: 1589067967
DOWNLOAD EBOOK →This paper explores the role of exchange rates in emerging economies with inflation-targeting regimes, an issue that has become especially germane during the current episode of financial turmoil and volatile capital flows. Under inflation targeting, the interest rate is the main monetary policy tool for influencing activity and inflation, and there is little agreement about the appropriate role of the exchange rate.The exchange rate is a more important monetary policy tool for emerging economies that have adopted inflation targeting than it is for inflation-targeting advanced economies. Inflation-targeting emerging economies generally have less flexible exchange rate arrangements and intervene more frequently in the foreign exchange market than their advanced economy counterparts. The enhanced role of the exchange rate reflects these economies' greater vulnerability to exchange rate shocks and their less developed financial markets. However, their sharper focus on the exchange rate may cause some confusion about the commitment of their central banks to achieve the inflation target and may also complicate policy implementation. Global inflation pressures, greater exchange rate volatility, and the financial stresses from the global financial turmoil that began in mid-2007 are heightening these tensions.
