Monetary Policy Independence under Flexible Exchange Rates: An Illusion?

Sebastian Edwards

The World Economy, 2015, vol. 38, issue 5, 773-787

Abstract: type="main" xml:id="twec12262-abs-0001">

I analyse whether countries with flexible exchange rates are able to pursue an independent monetary policy, as suggested by traditional theory. I use data for three Latin American countries with flexible exchange rates, inflation targeting and capital mobility – Chile, Colombia and Mexico – to investigate the extent to which Federal Reserve actions are translated into local central banks' policy rates. The results indicate that there is significant ‘policy contagion’ and that these countries tend to ‘import’ Fed policies. The degree of monetary policy independence is lower than what traditional models suggest.

Date: 2015
References: Add references at CitEc
Citations: View citations in EconPapers (57)

Downloads: (external link)
http://hdl.handle.net/10.1111/twec.2015.38.issue-5 (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bla:worlde:v:38:y:2015:i:5:p:773-787

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=0378-5920

Access Statistics for this article

The World Economy is currently edited by David Greenaway

More articles in The World Economy from Wiley Blackwell
Bibliographic data for series maintained by Wiley Content Delivery ().