Why are investors rushing to purchase US government securities when the US is the epicentre of the financial crisis? This column attributes the paradox to key emerging market economies’ exchange practices, which require reserves most often invested in US government securities. America’s...

This paper provides a cross country analysis of surges on capital inflows. Specifically, we examine the broad range of policies that countries have adopted to cope the challenges posed by large and volatile capital flows. We take stock of developments of exchange rate and monetary policy,...

Usando los datos anuales para Colombia durante los 30 años pasados, probamos las teorías de oposición que explican fluctuaciones macroeconómicas: la síntesis neoclásica, que postula eso en presencia de rigidez temporal del precio una extensión monetaria inesperada produce los aumentos de...

With many emerging market currencies tied to the U.S. dollar either implicitly or explicitly, movements in the exchange values of the currencies of major countries–in particular the prolonged appreciation of the U.S. dollar vis-a-vis the yen and the deutsche mark in advance of Asia’s...

In recent years, many developing countries have intervened in foreign exchange markets to offset to some extent the effect on their economies of large capital flows. Often, changes in reserve requirements were used to mitigate the impact of that intervention on domestic money supplies. Because...

Two assertions about exchange rate regimes circulate with some frequency in policy circles. The first, which could be called the hypothesis of the excluded middle, holds that authorities must either choose perfectly floating exchange rates or a hard peg. The second, seemingly unrelated, notion...

Using annual data for Colombia over the last thirty years and a new battery of econometric techniques, we test opposing theories that explain macroeconomic fluctuations: The neoclassical synthesis, which posits that, in the presence of temporary price rigidity, an unanticipated monetary...

Two assertions about exchange rate regimes circulate with some frequency in policy circles. The first, the hypothesis of the excluded middle, holds that authorities must either choose perfectly floating exchange rates (preferably anchored by an inflation target for the central bank) or a hard...

Economists have long been involved in the search for a few key indicators that predict the behavior of market economies. For Canada, it has been shown that the yield curve reliably tilts down and that real M1 growth declines before economic contraction, but this has been demonstrated almost...

With many emerging market currencies tied to the U.S. dollar either implicitly or explicitly, movements in the exchange values of the currencies of major countries have the potential to influence the competitive position of many developing countries. According to some analysts, establishing...