This paper assesses the impact of economic policy uncertainty to UK monetary policy stance and exchange rate movements in light of the UK's decision to leave the European Union. Our results show that the economic significance of exchange rate movements heightens during the Referendum period. We...

Dick Sabot, an active member of CGD's founding Board of Directors, was finishing this paper when he died suddenly on July 6 of 2005. The paper highlights the risks to developing countries posed by the growing U.S. external deficit and describes three possible scenarios. In the first, the US...

This paper analyzes the causes of the massive peso devaluation of December 1994 and the ensuing economic crisis in Mexico. The paper argues that, while earlier devaluation might have been helpful, Mexico?s economic growth strategy in the early 1990s was fraught with internal inconsistencies that...

A key challenge for macroeconomic policy in open economies is how to simultaneously manage exchange rates, interest rates and capital account openness - the trilemma. This paper calculates a trilemma index for India and investigates its evolution over time. We find that financial integration has...

Through the euro area crisis, financial fragmentation across jurisdictions became a prime concern for the single monetary policy. The ECB broadened the scope of its instruments and enacted a series of non-standard measures to engineer an appropriate degree of policy accommodation. The...

This paper measures the effect of monetary tightening in key advanced economies on net capital flows and exchange rates around the world. Measuring this effect is complicated by the fact that the domestic monetary policies of affected economies respond endogenously to the foreign tightening...

We develop a novel, risk-based theory of the effects of currency manipulation. In our model, the choice of exchange rate regime allows policymakers to make their currency, and by extension, the firms in their country, a safer investment for international investors. Policies that induce a...

A large literature estimates the exchange rate pass-through to prices (ERPT) using reducedform approaches; whose results are an important input for analyses at Central Banks. We study the usefulness of these empirical measures for monetary policy analysis and decision making, emphasizing two...

We analyze export price adjustment of Swiss manufacturing firms using a novel data set of matched export, import, and domestic prices. After a large, unexpected, and permanent appreciation of the Swiss franc, export prices set in domestic currency fell less than export prices set in foreign...

When do flexible exchange rates prevent monetary and financial conditions from spilling over across currencies? We examine a model in which international investors strategically supply capital to a small inflation-targeting economy with flexible exchange rates. For some combination of...