We test for the impact of exchange rate volatility on growth in emerging market economies based on the theory of optimum currency areas. Our findings provide evidence for a positive impact of exchange rate stability on growth. -- OCA ; growth

Given buoyant capital inflows and managed exchange rates the majority of emerging market central banks have continued to accumulate massive foreign reserves. If left unsterilized, the liquidity expansion can threaten domestic macroeconomic stability. To contain domestic inflation these central...