Central banks with an exchange rate objective set the interest rate in response to what they call "pressure." Instead, existing interest rate rules rely on the exchange rate minus its target. To stay closer to actual policy, we introduce a rule that uses exchange market pressure (EMP), the...

The procedure of fixing a currently floating exchange rate at a given (and publicly announced) future date has a broad range of applications. Based on a (continuous-time) monetary exchange rate model with flexible prices, this paper analyzes exchange rate dynamics during the transition from...

In order to examine the new RMB exchange rate regime rigorously, we employ the STARTZ model to investigate the behavior of RMB NEER from mid-2006 to mid-2008. We find that a managed float with a target central parity and without an explicit band best describes the daily movement of the exchange...

Evidence suggests there is a strong tendency among states to choose fixed exchange rates. Yet he interpretation of fixed exchange rates as a monetary policy rule remains unconvincing. Adopting an endogenous policy perspective, this paper argues that political-support maximizing governments...

The majority of households across emerging market economies are excluded from the financial markets and cannot smooth consumption. I analyze the implications of this for optimal monetary policy and the corresponding choice of domestic versus external nominal anchor in a small open economy...

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 study examines the role of the Chinese renminbi (RMB) as an international anchor currency. After China abandoned its tight US dollar (USD) peg in 2005, the RMB found greater popularity as a reserve currency. This change in the RMB's role reflected China's growing presence in the global...