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Living with flexible exchange rates:

  • corrinne ho

    (bank for international settlements)

  • robert n mccauley

    (bank for international settlements)

This 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 acted in contradiction to their announced inflation targets. 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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File URL: http://econwpa.repec.org/eps/if/papers/0411/0411003.pdf
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Paper provided by EconWPA in its series International Finance with number 0411003.

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Length: 55 pages
Date of creation: 06 Nov 2004
Date of revision:
Handle: RePEc:wpa:wuwpif:0411003
Note: Type of Document - pdf; pages: 55
Contact details of provider: Web page: http://econwpa.repec.org

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