The last decade has seen a worldwide move by emerging markets to adopt explicit or implicit inflation targeting regimes. A notable and often discussed exception to this trend, of course, is China which follows pegged exchange rate regime supported by capital controls. Another major exception is...

In this paper, we study the trilemma configuration of the Turkish economy. The paper starts by empirically testing the Mundell-Fleming theoretical concept of an “impossible trinity” (trilemma) for Turkey, following the Aizenman, Chinn and Ito (ACI) approach. This includes calculating the...

A key challenge for macroeconomic policy in open economies is how to simultaneously manage exchange rates, interest rates and capital account openness—the trilemma. This paper calculates a trilemma index for India and investigates its evolution over time. We find that financial integration has...

This paper addresses the debate in the literature on how developing countries are affected by foreign monetary policy shocks. I analyze how contractionary monetary policy shocks originating in different regions, specifically the Euro Area (“EU”) and United States (“US”), affect a set of...

In the near future, Romania will introduce inflation targeting and fully liberalize its capital account. This paper aims to analyze, in a dynamic general-equilibrium model with sticky prices and monopolistic competition, how these two profound changes will affect the ability of monetary policy...

This paper explores inflation dynamics and monetary policy in Bolivia. Bolivia's monetary policy framework has been effective in stabilizing inflation in recent times. This has been a challenging task given high price volatility of key consumer goods subject to recurrent supply shocks,...

The paper finds that exchange rate flexibility in emerging market countries has increased over the past decade. This ""learning to float"" appears to have involved a strengthening of monetary and financial policy frameworks aimed at directly addressing the key vulnerabilities that give rise to...

Korea was one of the Asian economies hardest hit by the global financial crisis. Anticipating the downturn that would follow the episode of extreme financial stress, the Bank of Korea (BOK) let the exchange rate depreciate as capital flowed out, and preemptively cut the policy rate by 325 basis...

This paper reviews recent experience with the choice of floating or fixed (“anchor”) exchange regimes in industrial and developing countries. It concludes that desirable differences between the two sets of regimes have narrowed, owing to the useful operational role of exchange rate margins...