ri2i...'y2fvygD2"ri2hyvve fvyg2eyg
BibTeX
@MISC{Oo_ri2i...'y2fvygd2"ri2hyvvefvyg2eyg,
author = {Oo Yvsgo Oo and An Interdependent World and An Interdependent World and Marcel Fratzscher and Marcel Fratzscher},
title = {ri2i...'y2fvygD2"ri2hyvve fvyg2eyg},
year = {}
}
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Abstract
The paper analyses the trade-off between exchange rate flexibility and monetary policy autonomy. It tests empirically the "Possible Duality" hypothesis, i.e. whether countries with more flexible currency regimes are indeed able to exert more monetary policy autonomy than those with less flexible ones, and whether moving towards exchange rate flexibility allows countries to gain monetary independence. The results for a set of open emerging markets and ERM countries show no systematic link between exchange rate flexibility and monetary independence. It is also found that the Fed is still the dominant force in world capital markets, although the importance of EU monetary policy decisions has been increasing and a Euro bloc has formed in Europe. JEL no. F41, F31, E50. Keywords: exchange rate regime, monetary policy, international transmission, GARCH, error correction model. igf2#2######63 ---###2x#2ISR2#2t###2PHHP S Non-Technical Summary Economists often emphasize the existence of the "Impossible Trinity", i.e. the inability of a country to have open capital markets, fixed exchange rates and an independent monetary policy simultaneously. But it has been assumed that a government can pursue any two of these policy objectives; in particular, that an open economy can exert full monetary independence if it only lets its exchange rate float. Examining whether this assumption of the "Possible Duality" really holds is the key motivation for this paper. More specifically, the paper tests empirically for a broad set of developed countries and emerging markets whether countries with more flexible currency regimes are indeed able to exert more monetary policy autonomy than those with less flexible ones, and whether moving towards exchange rate flexibility allows countries to gain mo...
Keyphrases
ri2hyvve fvyg2eyg monetary policy autonomy exchange rate flexibility towards exchange rate flexibility flexible one monetary independence flexible currency regime exchange rate regime key motivation open economy policy objective open capital market broad set euro bloc developed country impossible trinity fixed exchange rate systematic link dominant force world capital market international transmission error correction model non-technical summary economist erm country full monetary independence exchange rate float eu monetary policy decision monetary policy independent monetary policy possible duality possible duality hypothesis
