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 examines the role of Japan against that of China in the exchange rate regime in East Asia in light of growing interest in forming a currency union in the region. The analysis suggests that currency unions with China tend to generate higher average welfare gains for East Asian...

In the Mundell-Fleming framework, standard monetary policy and exchange rate flexibility fully insulate economies from shocks. However, that framework abstracts from many real world imperfections, and countries often resort to unconventional policies to cope with shocks, such as COVID-19. This...

This paper analyzes the appropriate choice of an exchange rate regime in agricultural commodity-exporting economies. In an open economy model that incorporates key structural characteristics of agricultural commodity exporters including dual labor markets, the benefits of exchange rate...

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...

The paper examines the experiences of nine African countries that have introduced floating exchange rate regimes in the 1980s. The various types of market arrangements are explored, focusing on the roles of market participants. After a review of exchange rate developments under the regimes, some...

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,...

Official accumulation of foreign reserves may be perceived as interventions to influence the exchange rate, undermining the credibility of floating exchange rates and inflation targets. This paper develops a theoretical framework to study the interaction between reserve accumulation and monetary...

This paper identifies the institutional and operational requisites for transitions to floating exchange rate regimes. In particular, it explores key issues underlying the transition, including developing a deep and liquid foreign exchange market, formulating intervention policies consistent with...