In recent years the term “fear of floating” has been used to describe exchange rate regimes that, while officially flexible, in practice intervene heavily to avoid sudden or large depreciations. However, the data reveals that in most cases (and increasingly so in the 2000s) intervention has...

The rapid increase in international trade and financial integration over the past decade and the growing importance of emerging markets in world trade and GDP have inspired the IMF to place stronger emphasis on multilateral surveillance, macro-financial linkages, and the implications of...

The effect of exchange rate volatility on trade flows was examined by a 1984 IMF study on G-7 countries. Over the past two decades, many developments in the world economy, such as the currency crises in the 1990s and increasing cross-border capital flows, may have exacerbated exchange rate...

The issue of the appropriate exchange rate regime for individual countries has been perennially lively, and the role played by international capital flows and domestic financial systems in determining the performance of these regimes has gained prominence in the policy debate. Using recent...

We apply BEER and PEER approaches to calculate real equilibrium exchange rates for five EU accession countries in central and east Europe. Bilateral nominal equilibrium exchange rates against the euro are obtained through algebraic transformation of the results. Panel cointegration techniques...

This Selected Issues paper analyzes the impact of the adoption of inflation targeting (IT) on exchange rate volatility in Russian Federation. Russia has seen an increase in exchange rate volatility during the past few years compared with the period before the global financial crisis, as the...

With the global economy beginning to emerge from the financial crisis, capital is flowing back to emerging market countries (EMEs). These flows, and capital mobility more generally, allow countries with limited savings to attract financing for productive investment projects, foster the...

Staff Discussion Notes showcase the latest policy-related analysis and research being developed by individual IMF staff and are published to elicit comment and to further debate. These papers are generally brief and written in nontechnical language, and so are aimed at a broad audience...

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...

We show the importance of a dynamic aggregation bias in accounting for the PPP puzzle. We prove that established time-series and panel methods substantially exaggerate the persistence of real exchange rates because of heterogeneity in the dynamics of disaggregated relative prices. When...