Exchange Rate Flexibility, Financial Market Openness and Economic Growth

Il Houng Lee, Kyunghun Kim () and Eunjung Kang ()
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Il Houng Lee: Korea Institute for International Economic Policy
Kyunghun Kim: Korea Institute for International Economic Policy
Eunjung Kang: Korea Institute for International Economic Policy

No 16-1, Staff Papers from Korea Institute for International Economic Policy

Abstract: With global recovery not in sight, along with calls for stronger structural reform, international policy coordination is again under spotlight. Correcting global imbalance would contribute towards closing the demand gap. Emerging economies in particular should allow greater exchange rate flexibility and not intervene in the foreign exchange market to reflect fundamentals. Yet, the impact of greater exchange rate flexibility is unclear as they also struggle to keep their growth momentum alive and hedge against greater exposure to potential capital reversal than ever before. With the loss of monetary policy independence, emerging markets (EMs) are running out of policy options. Against this background, unless international policy coordination is fundamentally recast, a comprehensive review of all emerging market economies’ policy options are in order, including both macro policy instruments, micro measures, and global safety net aimed at attaining the best possible solution to escaping global recession.

Keywords: Exchange Rate Flexibility; Financial Market; Economic Growth; Emerging Economies; Monetary Policy Independence (search for similar items in EconPapers)
JEL-codes: F31 F33 F43 G15 (search for similar items in EconPapers)
Pages: 39 pages
Date: 2016-04-20
New Economics Papers: this item is included in nep-ifn, nep-mon and nep-opm
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