Exchange Rates and Insulation in Emerging Markets

Abstract

The views expressed in this publication are those of the authors and do not necessarily reflect the views and policies of the Asian Development Bank (ADB) or its Board of Governors or the governments they represent.ADB does not guarantee the accuracy of the data included in this publication and accepts no responsibility for any consequence of their use. The mention of specific companies or products of manufacturers does not imply that they are endorsed or recommended by ADB in preference to others of a similar nature that are not mentioned.By making any designation of or reference to a particular territory or geographic area, or by using the term "country" in this document, ADB does not intend to make any judgments as to the legal or other status of any territory or area.

Redefining Strategic Routes to Financial Resilience in ASEAN+3

“…There have been a number of critiques and nuances to the dilemma hypothesis, including Obstfeld, Ostry, andQureshi (2018, 2019), Klein and Shambaugh (2015), and Eichengreen et al (2020), who argue that the conventional wisdom regarding Impossible Monetary Trilemma remains relevant especially for emerging economies (i.e., exchange rate flexibility does have insulation powers). Also see Cheng and Rajan (2020) and Han and Wei (2018) who suggest that there may exist a 2.5 lemma between the Dilemma and Trilemma.…”