Real Exchange Rate Targeting Under Capital Controls: Can Money Provide a Nominal Anchor?
AbstractThe issue of whether the money supply can serve as a nominal anchor for the domestic price level under real exchange rate targeting is examined. When capital controls are perfect, so that there is complete separation between official and unofficial foreign exchange markets, the domestic inflation rate can be stabilized, but only at the expense of a widening gap between official and parallel market exchange rates. When cross-transactions between the two markets are permitted, the domestic inflation rate cannot be stabilized either in the short run or the long run.
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Bibliographic InfoPaper provided by International Monetary Fund in its series IMF Working Papers with number 91/68.
Date of creation: 01 Jul 1991
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Other versions of this item:
- Peter J. Montiel & Jonathan D. Ostry, 1992. "Real Exchange Rate Targeting under Capital Controls: Can Money Provide a Nominal Anchor?," IMF Staff Papers, Palgrave Macmillan, vol. 39(1), pages 58-78, March.
- E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
- E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination
- F31 - International Economics - - International Finance - - - Foreign Exchange
- F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
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