scholarly journals Monetary policy independence and floating exchange rates: what does the Brazilian evidence tell us?

2004 ◽  
Vol 24 (1) ◽  
pp. 30-37
Author(s):  
CARLOS EDUARDO SOARES GONÇALVES
Keyword(s):  
Developing Countries ◽  
Monetary Policy ◽  
Exchange Rate ◽  
Exchange Rates ◽  
Interest Rates ◽  
Real Interest Rates ◽  
Pass Through ◽  
Exchange Rate Pass Through ◽  
Floating Exchange Rates ◽  
Fear Of Floating

ABSTRACT Some authors have advocated that shifting from fixed exchange rates to floating regimes has not delivered better economic outcomes to developing countries. As the argument goes, pervasive fear of floating in these economies has prevented drops in real interest rates and, more importantly, has been a hindrance in the way towards more monetary policy autonomy. This paper presents evidence suggesting this may not be the case for Brazil. More precisely, there are signs that fear of floating was less acute here (presumably due to low exchange rate pass-through) than elsewhere, and also that policymakers are now targeting monetary policy principally to domestic objectives.

scholarly journals Fear of Floating in Turkey

2015 ◽  
Vol 5 (2) ◽  
pp. 288
Author(s):  
Ilyas Sıklar ◽  
Taner Sekmen
Keyword(s):  
Exchange Rate ◽  
Exchange Rates ◽  
Currency Crises ◽  
Inflation Targeting ◽  
Foreign Exchange Rates ◽  
Before And After ◽  
Floating Exchange Rate ◽  
Pass Through ◽  
Exchange Rate Pass Through ◽  
Fear Of Floating

<p class="ber"><span lang="EN-GB">Many emerging markets have adopted floating exchange rate regimes after currency crises. Turkey has experienced a floating regime since 2002 combined with inflation targeting. The aim of this paper is to investigate the “fear of floating” phenomenon,</span><span lang="EN-GB"> named by Calvo and Reinhart (2002),</span><span lang="EN-GB"> in the transition to a low and stable inflation environment in Turkey before and after inflation targeting. The results demonstrate that the levels of exchange rate pass-through decreased substantially, thus weakening the “fear of floating” phenomenon in Turkey after inflation targeting. Therefore, we argue whether any reactions of the central bank to foreign exchange rates imply the “fear of floating” or the “fear of inflation”</span></p>

The influence of inflation targeting on the pass-through effect of the exchange rate

2018 ◽  
pp. 70-84
Author(s):  
Ph. S. Kartaev ◽  
Yu. I. Yakimova
Keyword(s):  
Developing Countries ◽  
Monetary Policy ◽  
Exchange Rate ◽  
Inflation Targeting ◽  
Policy Regime ◽  
Short And Long Term ◽  
The Exchange Rate ◽  
Pass Through ◽  
The Impact

The paper studies the impact of the transition to the inflation targeting regime on the magnitude of the pass-through effect of the exchange rate to prices. We analyze cross-country panel data on developed and developing countries. It is shown that the transition to this regime of monetary policy contributes to a significant reduction in both the short- and long-term pass-through effects. This decline is stronger in developing countries. We identify the main channels that ensure the influence of the monetary policy regime on the pass-through effect, and examine their performance. In addition, we analyze the data of time series for Russia. It was concluded that even there the transition to inflation targeting led to a decrease in the dependence of the level of inflation on fluctuations in the ruble exchange rate.

scholarly journals Vehicle Currency Pricing and Exchange Rate Pass-Through

2021 ◽  
Author(s):  
Natalie Chen ◽  
Wanyu Chung ◽  
Dennis Novy
Keyword(s):  
Exchange Rate ◽  
Exchange Rates ◽  
Great Recession ◽  
Firm Level ◽  
Bilateral Exchange ◽  
The Great Recession ◽  
Pass Through ◽  
Exchange Rate Changes ◽  
Exchange Rate Pass Through ◽  
The Relationship

Abstract Using detailed firm-level transactions data for UK imports, we find that invoicing in a vehicle currency is pervasive, with more than half of the transactions in our sample invoiced in neither sterling nor the exporter’s currency. We then study the relationship between invoicing currencies and the response of import unit values to exchange rate changes. We find that for transactions invoiced in a vehicle currency, import unit values are much more sensitive to changes in the vehicle currency than in the bilateral exchange rate. Pass-through therefore substantially increases once we account for vehicle currencies. This result helps to explain why UK inflation turned out higher than expected when sterling depreciated during the Great Recession and after the Brexit referendum. Finally, within a conceptual framework we show why bilateral exchange rates are not suitable for capturing exchange rate pass-through under vehicle currency pricing. Overall, our results help to clarify why the literature often finds a disconnect between exchange rates and prices when vehicle currencies are not accounted for.

Conclusions

2016 ◽  
Author(s):  
Jeffry A. Frieden
Keyword(s):  
Exchange Rate ◽  
Exchange Rates ◽  
Exchange Rate Policy ◽  
Theoretical Argument ◽  
Economic Agents ◽  
Cross Border ◽  
Domestic Prices ◽  
Pass Through ◽  
Exchange Rate Pass Through ◽  
Export Competition

This chapter summarizes key findings. This book makes a simple theoretical argument about the distributional implications of exchange rate policy. It suggests that economic actors with important cross-border interests, exposed to currency volatility, will tend to prefer more stable and predictable exchange rates. It also claims that tradables producers will, all else being equal, tend to prefer a depreciated real exchange rate. These concerns will be tempered by the extent of exchange rate pass-through—that is, the degree to which currency movements affect domestic prices. The analysis in this book shows that countries whose economic agents are more involved in cross-border trade are more likely to fix their exchange rates in order to reduce currency volatility. Countries with large groups susceptible to import or export competition—import-competing manufacturers and export farmers—are more likely to choose flexible exchange rates that allow currency depreciations. Governments facing an election encourage or allow currency appreciation that increases the purchasing power of consumers.

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