Research on Exchange Rates and Monetary Policy: An Overview

22 Pages Posted: 20 Sep 2007

See all articles by Jeffery D. Amato

Jeffery D. Amato

Goldman Sachs International

Andrew J. Filardo

Bank for International Settlements (BIS) - Monetary and Economic Department

Gabriele Galati

De Nederlandsche Bank

Goetz von Peter

Bank for International Settlements - Research and Policy Analysis

Feng Zhu

Bank for International Settlements (BIS)

Date Written: June 2005

Abstract

This paper reviews research carried out on exchange rates and monetary policy by central banks that participated at the Autumn Meeting of Central Bank Economists on "Exchange rates and monetary policy", which the BIS hosted on 28-29 October 2004. The first part of the paper focuses on the approaches that central banks have found most useful in modelling exchange rate behaviour. We describe efforts to explain exchange rate behaviour ex post and to forecast its future evolution ex ante. We then summarise central banks' recent research on the linkage between exchange rates and inflation, output, profits and the current account. We highlight the main models and methodologies, the main empirical results and the key challenges ahead. The second part of the paper is devoted to research that examines the actual experience that countries have had in incorporating the exchange rate into their monetary policy decisions, and the main lessons learned.

Keywords: Monetary Policy, International Finance, Macroeconomic Aspects of International Trade and Finance

JEL Classification: E5, F3, F4

Suggested Citation

Amato, Jeffery D. and Filardo, Andrew J. and Galati, Gabriele and von Peter, Goetz and Zhu, Feng, Research on Exchange Rates and Monetary Policy: An Overview (June 2005). BIS Working Paper No. 178. Available at SSRN: https://ssrn.com/abstract=846314 or http://dx.doi.org/10.2139/ssrn.846314

Jeffery D. Amato (Contact Author)

Goldman Sachs International ( email )

United States

Andrew J. Filardo

Bank for International Settlements (BIS) - Monetary and Economic Department ( email )

Centralbahnplatz 2
CH-4002 Basel
Switzerland

Gabriele Galati

De Nederlandsche Bank ( email )

PO Box 98
1000 AB Amsterdam
Amsterdam, 1000 AB
Netherlands

Goetz Von Peter

Bank for International Settlements - Research and Policy Analysis ( email )

CH-4002 Basel, Basel-Stadt
Switzerland
+ 41 61 280 8840 (Phone)

HOME PAGE: http://www.bis.org/author/goetz_von_peter.htm

Feng Zhu

Bank for International Settlements (BIS) ( email )

Centralbahnplatz 2
CH-4002 Basel
Switzerland
+41 61 280 9158 (Phone)
+41 61 280 9100 (Fax)

HOME PAGE: http://pantheon.yale.edu/~fz9

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