"This paper deals with the relationship between inflation targeting and exchange rates. I address three specific issues …: first, I analyze the effectiveness of nominal exchange rates as shock absorbers in countries with inflation targeting. This … volatility is different in countries with an inflation targeting regime than in countries with alternative monetary policy …

correspond to the two E-stable equilibria. The model is calibrated to the exchange rate histories of Argentina, Brazil, and … Mexico. Currency crises in these countries resemble the predicted "escape routes" of the model. A key feature of these escape …