Few papers have tried to project how Chinese monetary policy will behave under flexible exchange rates. As Japan provides an important role model for China, this paper studies the role of the yen/dollar exchange rate for Japanese monetary policy after the shift of Japan from a fixed to a...

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...

This chapter investigates the effect of the exchange regime on the likelihood of sudden stops. A panel probit analysis is conducted on the data of 43 developing countries from 1980 to 2010. The test investigates the interaction of surges and the exchange regime and their potential impact of the...

This paper analyzes the effects of intervention on the level and volatility of the exchange rate in Mexico and Turkey, two emerging countries that have floating exchange rate regimes. The paper finds mixed evidence on the effectiveness of intervention. In Mexico, foreign exchange sales have a...

The article presents an empirically tested assessment of the Bank of Slovenia (BS), national central bank, adjustment policy to surges in capital flows during the last decade. Exchange rate appreciation, undeveloped banking sector, immoderate money market oscillation, unstable economic trends...

Emerging market countries have enjoyed an exceptionally favorable economic environment throughout 2004, 2005, and early 2006. In particular, accommodative U.S. monetary policy in recent years has helped create an environment of low interest rates in international capital markets. However, if...

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 staff report for the 2006 Article IV Consultation on Botswana highlights economic developments and monetary and exchange rate policy. Botswana’s growth has been fueled by continued increases in diamond production; and real diamond output is projected to level off, and then decline...

Sharp exchange rate depreciations in the East Asian crisis countries (Indonesia, Korea, and Thailand) raised doubts about the efficacy of increasing interest rates to defend the currency. Using a standard monetary model of exchange rate determination, this paper shows that tighter monetary...

This paper examines the reaction of the bilateral Ch$/US$ exchange rate to monetary policy actions in Chile and the United States. The approach is to regress the change in the exchange rate following a policy announcement on changes in market interest rates in response to the same announcement....