Managing External Volatility: Policy Frameworks in Non-Reserve-Issuing Economies

Aleksandra Zdzienicka ()
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Aleksandra Zdzienicka: YPFS, Yale School of Management, https://elischolar.library.yale.edu/journal-of-financial-crises/
Authors registered in the RePEc Author Service: Zhongxia Zhang, Itai Agur and Johannes Eugster

Journal of Financial Crises, 2022, vol. 4, issue 3, 60-98

Abstract: Since the Global Financial Crisis, non-reserve-issuing economies (NREs) have been highly sensitive to episodes of external pressures. With monetary policy independence constrained by this sensitivity, many NREs have utilized other policy instruments. This paper confirms the vulnerability of NREs to external shocks and finds that, in some circumstances, managing such shocks with multiple instruments can both lessen the policy response required from any one policy tool to financial and external shocks and increase the effectiveness of policies in stabilizing macrofinancial conditions. Effectiveness, however, does not always imply appropriateness, which rests on an evaluation of potential trade-offs and unintended consequences.

Keywords: capital flow management measures; foreign exchange intervention; macroprudential policy; monetary policy; policy transmission and effectiveness (search for similar items in EconPapers)
JEL-codes: G01 G28 (search for similar items in EconPapers)
Date: 2022
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Working Paper: Managing External Volatility: Policy Frameworks in Non-Reserve Issuing Economies (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:ysm:ypfsfc:v:4:y:2022:i:3:p:60-98

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