Living with flexible exchange rates: issues and recent experience in inflation targeting emerging market economies
AbstractThis overview paper examines two main issues. The first is why the exchange rate matters, especially for emerging market economies. The second is under what circumstances and how countries have dealt with the challenges posed by the exchange rate in recent years in the context of inflation targeting. We find that emerging market economies, being more exposed to the influence of the exchange rate, are likely to accord the exchange rate a bigger role in policy assessment and decision-making. However, even with the greater emphasis on the exchange rate, the emerging market economies under review have not attended to the exchange rate in a manner that contradicted their announced inflation commitments. Furthermore, recent experience shows that having to keep an eye on the exchange rate is also a fact of life in industrial economies, inflation targeting or not.
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Bibliographic InfoPaper provided by Bank for International Settlements in its series BIS Working Papers with number 130.
Length: 55 pages
Date of creation: Feb 2003
Date of revision:
monetary policy; inflation targeting; exchange rate; intervention; capital controls;
Find related papers by JEL classification:
- E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
- E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
- F31 - International Economics - - International Finance - - - Foreign Exchange
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