Managed Floating as a Monetary Policy Strategy

Bofinger, Peter; Wollmershäuser, Timo

doi:10.1023/b:ecop.0000012258.15614.d8

Cited by 24 publications

(23 citation statements)

References 17 publications

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“…The second one has to do with the quasi-fiscal cost of sterilized intervention. Bofinger and Wollmerhäuser (2003) show that sterilized intervention is not costly if the peso valuation of the newly acquired reserves is included in the calculation of central bank profits. Nevertheless, the Central Bank's accounting procedures do not include peso-valuation effects of international reserves in the computation of profits.…”

Section: Rationale For Intervention As a Complement Of Monetary Policmentioning

confidence: 97%

“…Between 1999 and 2004 the exchange rate regime could be characterized most of the time as independent floating (Bofinger and Wollmerhäuser, 2003), that is, a floating regime with sporadic and relatively small interventions by the Central Bank in the forex market aimed at restoring the level of international reserves or curtailing excessive volatility. Unlike other central banks, the Central Bank of Colombia followed a rules-based forex market intervention and avoided discretionary intervention until September 2004.…”

Section: Introductionmentioning

confidence: 99%

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Exchange Rate Policy and Inflation Targeting in Colombia

H.¹

2005

SSRN Journal

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. The views and interpretations in this document are those of the authors and should not be attributed to the Inter-American Development Bank, or to any individual acting on its behalf. This paper may be freely reproduced provided credit is given to the Research Department, InterAmerican Development Bank. Terms of use: Documents inThe Research Department (RES) produces a quarterly newsletter, IDEA (Ideas for Development in the Americas), as well as working papers and books on diverse economic issues. To obtain a complete list of RES publications, and read or download them please visit our web site at: http://www.iadb.org/res.2 Abstract * This paper examines Colombia's experience with an inflation-targeting monetary policy following the abandonment of exchange rate bands in 1999, and two episodes in 2003 and 2004 that deviated from this general behavior. In these episodes, the Central Bank intervened in the forex market on a relatively large scale in order to affect the trend of the exchange rate (managed floating). These episodes are examined to draw lessons and highlight the main challenges facing monetary and forex policy. The rationale for central bank intervention in the forex market in Colombia is then critically discussed. Finally, the paper presents several issues that appear in the debate on Colombian monetary and forex policy and provides an idea of the political context in which monetary policy decisions are made.

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Section: Rationale For Intervention As a Complement Of Monetary Policmentioning

confidence: 97%

Section: Introductionmentioning

confidence: 99%

Exchange Rate Policy and Inflation Targeting in Colombia

H.¹

2005

SSRN Journal

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“…Therefore, in this framework, the uncovered parity condition and the monetary condition index play a crucial role. It is to be noted that the studies by Bofinger and Wollmershauser (2003) and Bofinger, Mayer and Wollmershauser (2006) consider perfect mobility of capital. As India operates under imperfect mobility of capital, managed float with sterilized intervention cannot be followed in the long run.…”

Section: Introductionmentioning

confidence: 99%

Global Financial Crisis, Capital Inflows and Policy Trilemma: An Analysis of the Indian Experience

Chakraborty

2016

South Asian Journal of Macroeconomics and Public Finance

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In the context of the global financial crisis, this article analyzes the behaviour of capital inflows in India during the period from 1993.2 to 2012.4. It also examines the question, how have the policy makers in India dealt with the 'policy trilemma' in a regime of liberalized capital inflows? The study finds that the volatility of capital inflows increased after the global financial crisis. Further, due to the global financial crisis, there were substantial changes in the relative importance of the factors that explain capital inflows. Although the 'pull factors' played major roles in both the periods, before and after the crisis, there were significant changes in their relative importance. In the first sub-period, real effective exchange rate and foreign exchange reserves played the most important roles in determining the capital inflows whereas in the second sub-period, it was only current account balance. While dealing with 'policy trilemma', we observed that the monetary policy independence was maintained in the period before the crisis which was sacrificed in the later period.

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“…They then revealed that intervention may be Pareto improving. Bofinger and Wollmershäuser (2003), who focused on monetary policy strategies on the basis of the so-called policy frontiers, showed that managed floating provides a better outcome than pure floating because of a lower social cost in terms of output and inflation volatility.…”

Section: Introductionmentioning

confidence: 99%

“…As far as the authors know, the welfare analysis of a managed floating regime has been scant, but Goldfajn and Silveira (2002) and Bofinger and Wollmershäuser (2003) are notable exceptions. We will pursue this issue by emphasizing a different informational friction from the previous authors.…”

Section: Introductionmentioning

confidence: 99%