A large literature on the appropriate sequencing of financial liberalization suggests that removing capital controls prematurely may contribute to currency instability. This paper investigates whether legal restrictions on international capital flows are associated with greater currency...

Remarks by President Dudley at the Foreign Policy Association Corporate Dinner, New York City.

Remarks by President Dudley at the Foreign Policy Association Corporate Dinner, New York City.

This paper explores the role of exchange rates in emerging economies with inflation-targeting regimes, an issue that has become especially germane during the current episode of financial turmoil and volatile capital flows. Under inflation targeting, the interest rate is the main monetary policy...

According to conventional models, flexible exchange rates play an equilibrating role in open economies, depreciating in response to adverse shocks, boosting net exports, and stimulating aggregate demand. However, critics argue that, at least in developing countries, devaluations are more...

This paper analyzes how exchange rate policies can best support the sustainability of disinflation programs. Freezing the nominal exchange rate frequently has been recommended as a means of suppressing inertial inflation and accelerating the disinflation process. However, because any resultant...