Designing Appropriate Exchange Rate Regimes for East Asia: Inflation Targeting and Monetary Policy Rules

Tony Cavoli () and Ramkishen Rajan
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Tony Cavoli: School of Economics, University of Adelaide, Australia

No 2003-09, Centre for International Economic Studies Working Papers from University of Adelaide, Centre for International Economic Studies

Abstract: While favoring relatively more flexible regimes, emerging economies in East Asia and elsewhere appear to heavily manage their currencies despite being officially described as “floaters”. In other words, revealed preferences of regional monetary authorities appear to indicate a high degree of “fear of floating”. The paper first explores the reasons for this fear of floating. It then goes on to examine the case for and operational mechanics behind an open inflation targeting regime which has increasingly been advocated for small and open economies in East Asia and elsewhere. The paper also attempts a reconciliation between the discussion of analytics behind open economy inflation targeting and its implications for exchange rate design, on the one hand, and actual exchange rate ongoings in East Asia, on the other.

Keywords: exchange rate; East Asia; fear of floating; impossible Trinity inflation targeting; monetary policy rules (search for similar items in EconPapers)
Pages: 57 pages
Date: 2003-04
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Citations: View citations in EconPapers (3)

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