IMF高级宏观经济学研修班课程CT1405MMFLMoneta.pptVIP

* What is the appropriate monetary and exchange rate policy regime? Many considerations are relevant Similar countries sometimes make different choices The best choice for any particular country may change over time JV 13.13. 第二十九页，共六十四页。 Choice of monetary framework Each monetary framework has its advantages and disadvantages. The choice depends on policy objectives and their relative importance: Reduce/stabilize inflation Stabilize output fluctuations U.S.: “maximum sustainable employment and low inflation” Avoid financial crises (financial stability) International or regional economic integration * JV 13.13. 第三十页，共六十四页。 1. Exchange rate targeting Provided the authorities have a clear commitment to ER stability, expectations of inflation will stabilize Short-run deviations are inevitable A long list of risks * JV 13.13. 第三十一页，共六十四页。 Risks of exchange rate targeting Fiscal dominance undermines the regime The peg currency may not be consistent with trade patterns (ex. Argentinean and Brazilian pegs to the U.S.$ in the 1990s and subsequent exits) Pegs encourage build up of balance sheet vulnerabilities Private sector—used to stable exchange rate—ignores exchange rate risk (plus bailout expectations) Build up in foreign currency debt (Asian crisis, Hungary and Romania lately) * JV 13.13. 第三十二页，共六十四页。 China’s Current Account Surplus has fallen in recent years and REER has appreciated * 第三十三页，共六十四页。 Impossible trinity again Loss of monetary policy as a stabilization tool With international capital mobility, impossible to target exchange rate and use monetary policy for output stabilization But the loss of independent monetary policy may be offset by benefits of regional integration e.g. Euro area, WAEMU Eliminating exchange rate risk lowers transactions costs and increases trade * JV 13.13. 第三十四页，共六十四页。 Bottom line on ER targeting Simple to operate “Gains from trade” can help “import” low inflation Fiscal dominance Need to find the right peg currency (or b