Voluminous theoretical and empirical research shows that real exchange rate (RER) undervaluation could be conducive to economic development. Why do countries then often avoid the pursuit of policies that facilitate undervaluation or even intentionally pursue RER overvaluation? We address this...

In this work we study the impact of FX interventions on Credit growth in Peru. Using Panel data at the firm-bank level from the Peruvian Credit Registry we find that purchases of dollars by the Central Bank are associated with reductions on the stock of credit held by Medium, Big and Corporate...

The present article proposes to draw on the recent experiences of many central banks of advanced economies and the evolution of their operational frameworks in the new context of increased domestic liquidity, when analysing the operations of central banks that engage in exchange rate management...

Robert Triffin (1911-1993) was one of the main protagonists in the international monetary debates in the postwar period. He became famous with his book Gold and the Dollar Crisis, published in 1960, in which he predicted the end of the Bretton Woods system. In his analysis there, Triffin was...

Central Asian Economies (CAEs) have diverse exchange rate policies. They have recorded higher volatility in the foreign exchange market since inception. High volatility of the transition era has drifted these economies towards partial dollarization. Monetary authorities in CAEs, (already have a...

Specialists in international finance have long been impressed by the fragility of currency pegs. Yet Danmarks Nationalbank has been able to maintain the krone's peg to the euro since the euro came into existence in 1999, and the krone's peg to the Deutschmark and SDR for 17 years before that....

This chapter highlights the challenges and potential negative effects that foreign intervention may hold for the classical liberalism and libertarianism. Foreign intervention is the use of the discretionary power of a government in one society to address the perceived problems in foreign...

This paper develops an estimated New Keynesian model of a commodity-exporting economy for an integrated policy framework, integrating the full range of policies used in practice and featuring a range of nominal and real rigidities, macro-financial linkages, and transmission channels of external...

While it is often argued that exchange rate depreciation has a beggar-thy-neighbour effect, in this paper, we investigate, whether exchange rate depreciation has a beggarthyself effect. Specifically, we explore the distributional consequences of Exchange rate movements. Using a heterogeneous...

This study examines the role of financial integration on exchange market pressure (EMP) across a representative group of forty-two advanced and emerging markets over the period 2000-2019, which covers the global financial crisis, which has heightened monetary and economic policy uncertainty. We...

China’s exchange rate policy has been one of the most contentious economic issues in present times. The large open economy with a state-led development model has been often accused of deliberately keeping its currency undervalued, thereby conferring unfair competitive advantages to its...

This working paper is written by J. Scott Davis (Federal Reserve Bank of Dallas), Michael B. Devereux (University of British Columbia) and Changhua Yu (Peking University).We model sudden stops in a small open economy as rare discrete events precipitated by increases in the world risk-free rate....

This paper estimates a 3-country DSGE model to identify the drivers of exchange rate volatility in small open economies (SOE). The model features common shocks that affect economies symmetrically. Using data from Jamaica, the US and the G-7 region, the paper finds that external financial shocks...

This paper develops a model to study the impact of central bank policies on financial assets' bubbles. In particular, we explore how investors react to a policy whereby the central bank decreases interest rates to alleviate market crashes during large bubble bursts. We show that the possibility...

This paper analyzes the effects of monetary and foreign exchange policies on the exchange rate in China by using structural VAR models with sign restrictions. In the empirical model, a number of monetary and foreign exchange policy instruments are considered and interactions among these...

China watchers have decried the emergence of the Cross-Border Interbank Payment System (“CIPS”) as a turning point in the move to dethrone the U.S. dollar. This Article situates CIPS, which clears and settles Chinese renminbi transactions, with other financial market infrastructures, drawing...

The Monetary Authority of Singapore, instead of relying on short-term interest rates or monetary aggregates as its monetary policy instrument, conducts policy by managing the exchange rate. This paper investigates how this operating procedure works. For empirical purposes, it assumes the...

How do policy makers manage the decline of an international currency? This paper examines British policy towards the pound sterling's international role in the years 1968-74. Using previously uncited government archival sources, we revisit the view that the 'sterling agreements' of 1968-74,...

This paper examines the implications of global currency wars for emerging economies. Currency wars, defined as competitive devaluations of currencies by countries to boost their exports and economic growth, have become increasingly common in recent years. The impacts of currency wars on emerging...

While it is often argued that exchange rate depreciation has a beggar-thy-neighbour effect, in this paper, we investigate, whether exchange rate depreciation has a beggar-thyself effect. Specifically, we explore the distributional consequences of exchange rate movements. Using a heterogeneous...

Emerging economies have been facing increasingly volatile exchange rates due to recent developments in financial markets. Such volatility is concerning for policy makers as exchange market pressure could potentially destabilize an otherwise stable economy. This paper models the determinants of...

In 2014, Argentina’s economy faced multiple crises: recession, currency devaluation, default, and inflation. In July 2014, the People’s Bank of China (PBOC) and the Central Bank of Argentina (BCRA) entered into a bilateral currency swap agreement with a three-year term for 70 billion...

As of the last working day of the year 2022 (30th December 2022), the official exchange rate against the US dollar (USD) was 448, while the naira USD exchange rate at the black market traded at 748—a premium of 300. The dollar had already peaked above 800 on the black market during the year...

The antecedent studies have designed new funding with the intellectual capital money (IKM) upon trading the intellectual capital (IK) to ensure unimpeded access to it and spur its generation and exploitation. This piece examines the static and dynamic behavior of IKM in an open economy. The...

We use panel quantile regressions to study extreme (rather than average) movements in the distribution of the real effective exchange rate (REER). Global uncertainty (VIX) and financial conditions (U.S. monetary policy) shocks have a strong impact on the distribution of REER changes, with larger...

We discuss the role of sterilized FX interventions as a monetary policy instrument in response to external shocks for emerging market economies. In our model, banks face an agency problem that constrains their ability to obtain funds denominated in domestic and foreign currency. The severity of...

Exchange rate volatility has emerged as a significant chal-lenge for Asian emerging markets since the adoption of the liberalization process. This study examines the influence of central banktransparency on exchange rate volatility using a sample of ten important Asian emerging markets. The...