Exchange Rate Flexibility, Financial Market Openness and Economic Growth

39 Pages Posted: 2 May 2016 Last revised: 13 Mar 2017

See all articles by Il Houng Lee

Il Houng Lee

The Bank of Korea - Monetary Policy Department; Korea Institute for International Economic Policy

Kyunghun Kim

Korea Institute for International Economic Policy

Eunjung Kang

Korea Institute for International Economic Policy

Date Written: April 20, 2016

Abstract

With global recovery not in sight, along with calls for stronger structural reform, international policy coordination is again under spotlight. Correcting global imbalance would contribute towards closing the demand gap. Emerging economies in particular should allow greater exchange rate flexibility and not intervene in the foreign exchange market to reflect fundamentals. Yet, the impact of greater exchange rate flexibility is unclear as they also struggle to keep their growth momentum alive and hedge against greater exposure to potential capital reversal than ever before. With the loss of monetary policy independence, emerging markets (EMs) are running out of policy options. Against this background, unless international policy coordination is fundamentally recast, a comprehensive review of all emerging market economies’ policy options are in order, including both macro policy instruments, micro measures, and global safety net aimed at attaining the best possible solution to escaping global recession.

Keywords: Exchange Rate Flexibility, Financial Market, Economic Growth, Emerging Economies, Monetary Policy Independence

JEL Classification: F31, F33, F43, G15

Suggested Citation

Lee, Il Houng and KIim, Kyunghun and Kang, Eunjung, Exchange Rate Flexibility, Financial Market Openness and Economic Growth (April 20, 2016). KIEP Research Paper, Staff Papers 16-01, Available at SSRN: https://ssrn.com/abstract=2773337 or http://dx.doi.org/10.2139/ssrn.2773337

Il Houng Lee (Contact Author)

The Bank of Korea - Monetary Policy Department

39, Namdaemun-ro
Jung-gu
Seoul, 100-794
Korea, Republic of (South Korea)

Korea Institute for International Economic Policy ( email )

Seoul 137-602

Kyunghun KIim

Korea Institute for International Economic Policy ( email )

[30147] Building C, Sejong National Research Compl
Seoul, 370
Korea, Republic of (South Korea)

Eunjung Kang

Korea Institute for International Economic Policy ( email )

[30147] Building C, Sejong National Research Compl
Seoul, 370
Korea, Republic of (South Korea)

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
102
Abstract Views
1,378
rank
304,054
PlumX Metrics