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Exchange Rate Flexibility, Financial Market Openness and Economic Growth

Author

Listed:
  • Lee, Il Houng

    (Korea Institute for International Economic Policy)

  • Kim, Kyunghun

    (Korea Institute for International Economic Policy)

  • Kang, Eunjung

    (Korea Institute for International Economic Policy)

Abstract

With global recovery not in sight, along with calls for stronger structural reform, international policy coordination is again under spotlight. Correcting global imbalance would contribute towards closing the demand gap. Emerging economies in particular should allow greater exchange rate flexibility and not intervene in the foreign exchange market to reflect fundamentals. Yet, the impact of greater exchange rate flexibility is unclear as they also struggle to keep their growth momentum alive and hedge against greater exposure to potential capital reversal than ever before. With the loss of monetary policy independence, emerging markets (EMs) are running out of policy options. Against this background, unless international policy coordination is fundamentally recast, a comprehensive review of all emerging market economies’ policy options are in order, including both macro policy instruments, micro measures, and global safety net aimed at attaining the best possible solution to escaping global recession.

Suggested Citation

  • Lee, Il Houng & Kim, Kyunghun & Kang, Eunjung, 2016. "Exchange Rate Flexibility, Financial Market Openness and Economic Growth," Staff Papers 16-1, Korea Institute for International Economic Policy.
    • Handle: RePEc:ris:kiepsp:2016_001
    DOI: 10.2139/ssrn.2773337
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    References listed on IDEAS

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    More about this item

    Keywords

    Exchange Rate Flexibility; Financial Market; Economic Growth; Emerging Economies; Monetary Policy Independence;
    All these keywords.

    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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