Inflation Targeting across the Region
Inflation Targeting across the Region
This chapter first considers the arguments in favor of floating exchange rates. There are essentially two major arguments in support of floating regimes and against monetary strategies based on an external (i.e., exchange rate) target. First, it is claimed that fixed exchange rate regimes are prone to crisis because they are vulnerable to speculative attacks. Second, it is maintained that nonfloating regimes undermine a country’s monetary autonomy, at least in a situation without capital account restrictions. The chapter then shows why monetary policies directed at purely domestic targets are problematic for the majority of East Asian countries.
Keywords: floating exchange rates, monetary policies, East Asian countries, inflation targeting
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