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Research on exchange rates and monetary policy: an overview

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  • Jeffery D. Amato

    (Goldman Sachs International)

  • Andrew Filardo
  • Gabriele Galati
  • Goetz von Peter
  • Feng Zhu

Abstract

This paper reviews research carried out on exchange rates and monetary policy by central banks that participated at the Autumn Meeting of Central Bank Economists on "Exchange rates and monetary policy", which the BIS hosted on 28-29 October 2004. The first part of the paper focuses on the approaches that central banks have found most useful in modelling exchange rate behaviour. We describe efforts to explain exchange rate behaviour ex post and to forecast its future evolution ex ante. We then summarise central banks' recent research on the linkage between exchange rates and inflation, output, profits and the current account. We highlight the main models and methodologies, the main empirical results and the key challenges ahead. The second part of the paper is devoted to research that examines the actual experience that countries have had in incorporating the exchange rate into their monetary policy decisions, and the main lessons learned.

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Bibliographic Info

Paper provided by Bank for International Settlements in its series BIS Working Papers with number 178.

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Length: 22 pages
Date of creation: Jun 2005
Date of revision:
Handle: RePEc:bis:biswps:178

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Related research

Keywords: Monetary Policy; International Finance; Macroeconomic Aspects of International Trade and Finance;

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References

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  1. Adrien Verdelhan, 2006. "A Habit-Based Explanation of the Exchange Rate Risk Premium," Boston University - Department of Economics - Working Papers Series, Boston University - Department of Economics WP2006-047, Boston University - Department of Economics.
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  3. M S Mohanty & Marc Klau, 2001. "What determines inflation in emerging market economies?," BIS Papers chapters, in: Bank for International Settlements (ed.), Modelling aspects of the inflation process and the monetary transmission mechanism in emerging market countries, volume 8, pages 1-38 Bank for International Settlements.
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Citations

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Cited by:
  1. Bonpasse, Morrison, 2007. "The Single Global Currency - Common Cents for the World (2007 Edition)," MPRA Paper 5879, University Library of Munich, Germany.
  2. Forte, Antonio, 2009. "The stability of the inflation rate in the Euro area: the role of Globalization and labour market," MPRA Paper 16587, University Library of Munich, Germany.
  3. Forte, Antonio, 2009. "The pass-through effect: a twofold analysis," MPRA Paper 16527, University Library of Munich, Germany.
  4. Bonpasse, Morrison, 2006. "The Single Global Currency: Common Cents for the World," MPRA Paper 1175, University Library of Munich, Germany.
  5. Bharat Chadha, 2007. "Impact of U.S. Federal Interest Rate and Movement of MSCI on Indian Capital Markets," Working Papers id:1024, eSocialSciences.
  6. Bank for International Settlements, 2007. "Evolving banking systems in Latin America and the Caribbean: challenges and implications for monetary policy and financial stability," BIS Papers, Bank for International Settlements, Bank for International Settlements, number 33, 8.
  7. Robert Neil McCauley, 2006. "Understanding monetary policy in Malaysia and Thailand: objectives, instruments and independence," BIS Papers chapters, in: Bank for International Settlements (ed.), Monetary policy in Asia: approaches and implementation, volume 31, pages 172-198 Bank for International Settlements.
  8. Bonpasse, Morrison, 2009. "The single global currency - common cents for the world (2008 Edition)," MPRA Paper 14756, University Library of Munich, Germany.

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