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Exchange Rate Policy in Small Rich Economies

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  • Francis Breedon
  • Thórarinn G. Pétursson
  • Andrew K. Rose

Abstract

We look at the exchange rate policy choices and outcomes for small rich economies. Small rich economies face significant policy challenges due to proportionately greater economic volatility than larger economies. These economies usually choose some form of fixed exchange rate regime, particularly in the very small economies where the per capita cost of independent monetary policy is relatively high. When such countries do choose a free or managed floating regime, they appear to derive no benefit from those regimes; their exchange rate volatility seems to rise without any significant change in fundamental economic volatility. Thus, for these countries, floating exchange rates seem to create problems for policy makers without solving any.

Suggested Citation

  • Francis Breedon & Thórarinn G. Pétursson & Andrew K. Rose, 2011. "Exchange Rate Policy in Small Rich Economies," Economics wp53, Department of Economics, Central bank of Iceland.
  • Handle: RePEc:ice:wpaper:wp53
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    References listed on IDEAS

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    1. repec:kap:atlecj:v:45:y:2017:i:4:d:10.1007_s11293-017-9555-5 is not listed on IDEAS
    2. Bohl, Martin T. & Michaelis, Philip & Siklos, Pierre L., 2016. "Austerity and recovery: Exchange rate regime choice, economic growth, and financial crises," Economic Modelling, Elsevier, vol. 53(C), pages 195-207.
    3. Michael Bleaney & Mo Tian & Lin Yin, 2016. "Global Trends in the Choice of Exchange Rate Regime," Open Economies Review, Springer, vol. 27(1), pages 71-85, February.
    4. Dumitriu, Ramona & Stefanescu, Razvan, 2013. "Utilizarea cursurilor valutare drept ancore nominale antiinflaţioniste
      [The use of exchange rates as nominal anchors]
      ," MPRA Paper 52415, University Library of Munich, Germany.
    5. Bjarni G. Einarsson & Gudjón Emilsson & Svava J. Haraldsdóttir & Thórarinn G. Pétursson & Rósa B. Sveinsdóttir, 2013. "On our own? The Icelandic business cycle in an international context," Economics wp63, Department of Economics, Central bank of Iceland.
    6. Ghassan Dibeh, 2014. "The Political Economy of Monetary Policy in Resource-Rich Arab Economies," Working Papers 896, Economic Research Forum, revised Dec 2014.
    7. Bjarni G. Einarsson & Gudjón Emilsson & Svava J. Haraldsdóttir & Ólafur Ö. Klemensson & Thórarinn G. Pétursson & Rósa B. Sveinsdóttir, 2013. "The production and export structure of the Icelandic economy. An international comparison," Economics wp60, Department of Economics, Central bank of Iceland.
    8. Bjarni G. Einarsson & Kristófer Gunnlaugsson & Thorvardur Tjörvi Ólafsson & Thórarinn G. Pétursson, 2016. "The long history of financial boom-bust cycles in Iceland - Part II: Financial cycles," Economics wp72, Department of Economics, Central bank of Iceland.
    9. Ortega, José Luis & Aguillo, Isidro F., 2013. "Institutional and country collaboration in an online service of scientific profiles: Google Scholar Citations," Journal of Informetrics, Elsevier, vol. 7(2), pages 394-403.
    10. Peter, Manuel, 2015. "Konvergenz der europäischen Aktienmärkte: Eine Analyse der Entwicklungen und Herausforderungen für Investoren," Arbeitspapiere 150, University of Münster, Institute for Cooperatives.
    11. Bjarni G. Einarsson & Kristófer Gunnlaugsson & Thorvardur Tjörvi Ólafsson & Thórarinn G. Pétursson, 2015. "The long history of financial boom-bust cycles in Iceland - Part I: Financial crises," Economics wp68, Department of Economics, Central bank of Iceland.
    12. repec:wsi:serxxx:v:62:y:2017:i:01:n:s0217590817400069 is not listed on IDEAS
    13. International Monetary Fund, 2012. "Iceland; Selected Issues Paper," IMF Staff Country Reports 12/90, International Monetary Fund.

    More about this item

    JEL classification:

    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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