Targeting The Real Exchange Rate

Author : Mr.Guillermo Calvo,Ms.Carmen Reinhart,Mr.Carlos A. Végh Gramont
Publisher : International Monetary Fund
Page : 50 pages
File Size : 54,5 Mb
Release : 1994-02-01
Category : Business & Economics
ISBN : 9781451921212

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Targeting the Real Exchange Rate by Mr.Guillermo Calvo,Ms.Carmen Reinhart,Mr.Carlos A. Végh Gramont Pdf

This paper presents a theoretical and empirical analysis of policies aimed at setting a more depreciated level of the real exchange rate. An intertemporal optimizing model suggests that, in the absence of changes in fiscal policy, a more depreciated level of the real exchange can only be attained temporarily. This can be achieved by means of higher inflation and/or higher real interest rates, depending on the degree of capital mobility. Evidence for Brazil, Chile, and Colombia supports the model’s prediction that undervalued real exchange rates are associated with higher inflation.

Author : Carmen M. Reinhart
Publisher : Unknown
Page : 50 pages
File Size : 47,6 Mb
Release : 2006
Category : Electronic
ISBN : OCLC:1291213279

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Targeting the Real Exchange Rate by Carmen M. Reinhart Pdf

This paper presents a theoretical and empirical analysis of policies aimed at setting a more depreciated level of the real exchange rate. An intertemporal optimizing model suggests that, in the absence of changes in fiscal policy, a more depreciated level of the real exchange can only be attained temporarily. This can be achieved by means of higher inflation and/or higher real interest rates, depending on the degree of capital mobility. Evidence for Brazil, Chile, and Colombia supports the model`s prediction that undervalued real exchange rates are associated with higher inflation.

Author : Mr.José Saúl Lizondo
Publisher : International Monetary Fund
Page : 30 pages
File Size : 52,6 Mb
Release : 1993-04-01
Category : Business & Economics
ISBN : 9781451845624

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Real Exchange Rate Targeting Under Imperfect Asset Substitutability by Mr.José Saúl Lizondo Pdf

This paper presents a model of an economy that uses nominal exchange rate policy to keep the real exchange rate constant at a certain target level, under imperfect asset substitutability. The paper discusses the determinants of inflation under such a policy, and examines the consequences of exogenous and policy-induced shocks on inflation, the external accounts, and the fiscal accounts. The shocks considered include changes in the real exchange rate target, changes in fiscal policy, changes in foreign interest rates, and open market sales of public sector domestic bonds.

Author : Peter J. Montiel,Jonathan David Ostry
Publisher : Unknown
Page : 54 pages
File Size : 40,5 Mb
Release : 1991
Category : Developing countries
ISBN : UCSD:31822006650832

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Macroeconomic Implications of Real Exchange Rate Targeting in Developing Countries by Peter J. Montiel,Jonathan David Ostry Pdf

Author : Peter Montiel,Jonathan David Ostry
Publisher : Unknown
Page : 24 pages
File Size : 46,6 Mb
Release : 1993
Category : Foreign exchange rates
ISBN : UCSD:31822015315351

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Real Exchange Rate Targeting in Developing Countries by Peter Montiel,Jonathan David Ostry Pdf

Author : Carlos A. Végh,Guillermo A. Calvo,Carmen M. Reinhart
Publisher : Unknown
Page : 37 pages
File Size : 43,7 Mb
Release : 1994
Category : America
ISBN : OCLC:481080219

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Targeting the Real Exchange Rate by Carlos A. Végh,Guillermo A. Calvo,Carmen M. Reinhart Pdf

Author : Mr.Peter Montiel,Mr.Jonathan David Ostry
Publisher : International Monetary Fund
Page : 25 pages
File Size : 41,6 Mb
Release : 1991-07-01
Category : Business & Economics
ISBN : 9781451961010

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Real Exchange Rate Targeting Under Capital Controls by Mr.Peter Montiel,Mr.Jonathan David Ostry Pdf

This paper examines the issue of whether the money supply can serve as a nominal anchor for the domestic price level under real exchange rate targeting. When capital controls are perfect so that there is complete separation between official and unofficial markets for foreign exchange, 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 steady state of the model is identical to that of a model without capital controls and, hence, the money supply cannot serve as a nominal anchor for the price level in the long run. If capital controls are nevertheless maintained temporarily, and are known to be temporary, targeting the money supply fails to stabilize the rate of inflation even in the short run.

Author : P. J. Montiel
Publisher : Unknown
Page : 128 pages
File Size : 54,5 Mb
Release : 1999
Category : Electronic
ISBN : OCLC:1101887474

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Real Exchange Rate Targeting in Developing Countries by P. J. Montiel Pdf

Author : Mr. Marco Airaudo
Publisher : International Monetary Fund
Page : 65 pages
File Size : 43,6 Mb
Release : 2016-03-08
Category : Business & Economics
ISBN : 9781475523164

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Inflation Targeting and Exchange Rate Management In Less Developed Countries by Mr. Marco Airaudo Pdf

We analyze coordination of monetary and exchange rate policy in a two-sector model of a small open economy featuring imperfect substitution between domestic and foreign financial assets. Our central finding is that management of the exchange rate greatly enhances the efficacy of inflation targeting. In a flexible exchange rate system, inflation targeting incurs a high risk of indeterminacy where macroeconomic fluctuations can be driven by self-fulfilling expectations. Moreover, small inflation shocks may escalate into much larger increases in inflation ex post. Both problems disappear when the central bank leans heavily against the wind in a managed float.

Author : Mr.Marco Airaudo,Mr.Edward F. Buffie,Luis-Felipe Zanna
Publisher : International Monetary Fund
Page : 65 pages
File Size : 50,5 Mb
Release : 2016-03-08
Category : Business & Economics
ISBN : 9781513567433

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Inflation Targeting and Exchange Rate Management In Less Developed Countries by Mr.Marco Airaudo,Mr.Edward F. Buffie,Luis-Felipe Zanna Pdf

We analyze coordination of monetary and exchange rate policy in a two-sector model of a small open economy featuring imperfect substitution between domestic and foreign financial assets. Our central finding is that management of the exchange rate greatly enhances the efficacy of inflation targeting. In a flexible exchange rate system, inflation targeting incurs a high risk of indeterminacy where macroeconomic fluctuations can be driven by self-fulfilling expectations. Moreover, small inflation shocks may escalate into much larger increases in inflation ex post. Both problems disappear when the central bank leans heavily against the wind in a managed float.

Author : E. Martin,I. Karpowicz,Nicole Laframboise,Randa Sab,Domenico Fanizza
Publisher : INTERNATIONAL MONETARY FUND
Page : 27 pages
File Size : 41,7 Mb
Release : 2002-11-01
Category : Electronic
ISBN : 1451859678

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Tunisia's Experience with Real Exchange Rate Targeting and the Transition to a Flexible Exchange Rate Regime by E. Martin,I. Karpowicz,Nicole Laframboise,Randa Sab,Domenico Fanizza Pdf

Over the past decade or so, Tunisia has experienced a strong economic performance while pursuing a constant real exchange rate rule (CRERR). The limitations of this rule are now beginning to emerge in the context of a more open economy, regional integration, a more market-based monetary policy, and the desire to relax capital controls. This paper explores how Tunisia avoided the pitfalls of real exchange rate targeting as predicted by the theoretical models. By estimating the equilibrium real exchange rate based on fundamental variables and assessing different measures of competitiveness, the paper finds no evidence of a misalignment in the current level of the exchange rate.

Author : J. Saul Lizondo
Publisher : Unknown
Page : 30 pages
File Size : 52,8 Mb
Release : 2006
Category : Electronic
ISBN : OCLC:1291213210

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Real Exchange Rate Targeting Under Imperfect Asset Substitutability by J. Saul Lizondo Pdf

This paper presents a model of an economy that uses nominal exchange rate policy to keep the real exchange rate constant at a certain target level, under imperfect asset substitutability. The paper discusses the determinants of inflation under such a policy, and examines the consequences of exogenous and policy-induced shocks on inflation, the external accounts, and the fiscal accounts. The shocks considered include changes in the real exchange rate target, changes in fiscal policy, changes in foreign interest rates, and open market sales of public sector domestic bonds.

Author : Martín Uribe
Publisher : Unknown
Page : 52 pages
File Size : 47,9 Mb
Release : 2002
Category : Foreign exchange rates
ISBN : UCSD:31822032511016

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Real Exchange Rate Targeting and Macroeconomic Instability by Martín Uribe Pdf

Using an optimizing model of a small open economy, this paper studies the macroeconomic effects of PPP rules whereby the government increases the devaluation rate when the real exchange rate defined as the price of tradables in terms of nontradables is below its long-run level and reduces the devaluation rate when the real exchange rate is above its long-run level. The paper shows that the mere existence of such a rule can generate aggregate fluctuations due to self-fulfilling revisions in expectations. The result is shown to obtain in both flexible- and sticky-price environments.

Author : Felix Hüfner
Publisher : Springer Science & Business Media
Page : 180 pages
File Size : 53,8 Mb
Release : 2012-12-06
Category : Business & Economics
ISBN : 9783790826722

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Foreign Exchange Intervention as a Monetary Policy Instrument by Felix Hüfner Pdf

Foreign exchange intervention is frequently being used by central banks in countries which have a floating exchange rate. Most theoretical monetary policy models, however, do not take this phenomenon into account. This book contributes to close this gap between theory and practice by interpreting foreign exchange intervention as an additional monetary policy instrument for inflation targeting central banks. In-depth empirical analyses of the foreign exchange operations and interest rate policy of five inflation targeting countries (Australia, Canada, New Zealand, Sweden and the United Kingdom) demonstrate how foreign exchange intervention is used in practice.

Author : Mr.Luis Catão,Roberto Chang
Publisher : International Monetary Fund
Page : 48 pages
File Size : 51,8 Mb
Release : 2013-05-17
Category : Business & Economics
ISBN : 9781484371565

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World Food Prices, the Terms of Trade-Real Exchange Rate Nexus, and Monetary Policy by Mr.Luis Catão,Roberto Chang Pdf

How should monetary policy respond to large fluctuations in world food prices? We study this question in an open economy model in which imported food has a larger weight in domestic consumption than abroad and international risk sharing can be imperfect. A key novelty is that the real exchange rate and the terms of trade can move in opposite directions in response to world food price shocks. This exacerbates the policy trade-off between stabilizing output prices vis a vis the real exchange rate, to an extent that depends on risk sharing and the price elasticity of exports. Under perfect risk sharing, targeting the headline CPI welfare-dominates targeting the PPI if the variance of food price shocks is not too small and the export price elasticity is realistically high. In such a case, however, targeting forecast CPI is a superior choice. With incomplete risk sharing, PPI targeting is clearly a winner.