After decades using monetary aggregates as the main instrument of monetary policy and having different varieties of crawling peg exchange rate regimes, Colombia adopted a full-fledged inflation-targeting (IT) regime in 1999, with inflation as the nominal anchor, a floating exchange rate, and the...

The Federal Reserve’s unconventional monetary policy announcements in 2008–2009 substantially reduced international long-term bond yields and the spot value of the dollar. These changes closely followed announcements and were very unlikely to have occurred by chance. A simple portfolio...

In case of speculative attacks, the central banks' decisions to intervene or not to intervene seem to play an important role for the economic costs of currency crises. The central bank can either abstain from intervening or start an intervention, which in turn can be successful or unsuccessful....

This aim of the present paper is to measure first, the degree of trilemma indexes: exchange rate stability, monetary independence capital account openness while taking into account the increase of hording IR ratio over GDP, over External Debt and over Short Term External Debt. The evolution of...

While currency crises are typically considered to be painful and costly events, a closer look reveals that economic developments after a speculative attack differ considerably. Monetary authorities can play a central role in determining the economic course and costs of currency crises. They have...

Heightened volatility in cross-border capital flows has increased exchange rate volatility across emerging markets as well as in advanced economies, setting the stage for more active management of currencies. Traditionally, foreign exchange rate intervention has been the primary tool to address...

Recently, Central Bank of the Republic of Turkey designed new policy instruments in order to reduce the adverse impact of volatile capital flows on macroeconomic and financial stability. This paper aims to introduce one of the new instruments: “Reserve Options Mechanism” (ROM). We describe...

Halving the US current account deficit as a share of GDP is likely to impose a burden of $2,350 per capita on the United States, which explains why US policymakers want to postpone adjustment. The rest of the world relies on the economic stimulus of a widening US external deficit, which explains...

We investigate the role of exchange rates in inflation-targeting emerging economies. We give strong evidence that hybrid inflation-targeting frameworks, where exchange rate is managed, deliver a stronger nominal anchor, as they show better resistance to the 2007–2008 inflation shock.

Empirical estimates of the Reserve Bank of India's (RBI) intervention reaction function suggest that the central bank actively intervenes in the foreign exchange market to contain volatility but this intervention is neither continuous nor linear. It is better described by a nonlinear policy...