BOFIT Discussion Papers, Institute for Economies in Transition, Bank of Finland
No 9/2011:
Flexible inflation targets, forex interventions and exchange rate volatility in emerging countries
Juan Carlos Berganza ()
and Carmen Broto
Abstract: Emerging economies with inflation targets (IT) face a
dilemma between fulflling the theoretical conditions of "strict IT", which
implies a fully flexible exchange rate, or applying a "flexible IT", which
entails a de facto managed floating exchange rate with forex interventions
to moderate exchange rate volatility. Using a panel data model for 37
countries we find that, although IT lead to higher exchange rate
instability than alternative regimes, forex interventions in some IT
countries have been more effective in reducing volatility than in non-IT
countries, which may justify the use of "flexible IT" by policymakers.
Keywords: inflation targeting; exchange rate volatility; foreign exchange interventions; emerging economies; (follow links to similar papers)
JEL-Codes: E31; E42; E52; E58; F31; (follow links to similar papers)
37 pages, May 26, 2011
Before downloading any of the electronic versions below
you should read our statement on
copyright.
Download GhostScript
for viewing Postscript files and the
Acrobat Reader for viewing and printing pdf files.
Full text versions of the paper:
DP0911.pdf 
Download Statistics
Questions (including download problems) about the papers in this series should be directed to Päivi Määttä ()
Report other problems with accessing this service to Sune Karlsson ()
or Helena Lundin ().
Programing by
Design by Joachim Ekebom
