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          The Scope for Foreign Exchange Market Interventions (English)
          Discussion paper by Bofinger, Peter / University of Wuerzburg, 2011, 36 pages
          Categories: Macroeconomic Policy

          The paper advocates for a strategy of managed floating which can reconcile three objectives that are usually not considered reconcilable - an autonomous monetary policy, a control over the exchange rate and free capital movements. If a central bank targets an exchange rate level based on the interest rate difference between two currencies, it can at the same time set its policy rate autonomously. By eliminating the interest rate differences between countries, such targeting also eliminates the incentives for carry trade and is hence compatible with capital mobility.