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We develop a microfounded New Keynesian model to analyze monetary policy and financial stability issues in open economies with financial fragilities and weakly anchored inflation expectations. We show that foreign exchange intervention (FXI) and capital flow management tools (CFMs) can improve...
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. The paper hypothesizes that the overshooting phase-observed early in the depreciation episode and driven by the balance … depreciation. Given this, larger real exchange rate overshooting should signal a relatively stronger balance sheet effect …. Empirical findings support this hypothesis: (i) overshooting is driven by factors associated with the balance sheet effect (high …
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Employment -- Some Important Implications -- Exchange Rate Overshooting -- Exchange Rate Determination -- Issues Regarding … countries, to avoid exchange rate overshooting, have tended to automatically follow the same monetary policy as the United …
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The existing literature has explained the causality flow from the exchange rates toward the stock market without explaining the role of the economic crisis in effecting this nexus. This study examines the role of the financial crisis in affecting the nonlinear causality flowing from the exchange...
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