Monetary Policy Independence under Flexible Exchange Rates: An Illusion? / Sebastian Edwards.

Format:

Book

Author/Creator:

Edwards, Sebastian.

Contributor:

National Bureau of Economic Research.

Series:

Working Paper Series (National Bureau of Economic Research) no. w20893.

NBER working paper series no. w20893

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Other Title:

Monetary Policy Independence under Flexible Exchange Rates

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2015.

Summary:

I analyze whether countries with flexible exchange rates are able to pursue an independent monetary policy, as suggested by traditional theory. I use data for three Latin American countries with flexible exchange rates, inflation targeting, and capital mobility - Chile, Colombia and Mexico - to investigate the extent to which Federal Reserve actions are translated into local central banks' policy rates. The results indicate that there is significant "policy contagion," and that these countries tend to "import" Fed policies. The degree of monetary policy independence is lower than what traditional models suggest.

Notes:

Print version record

January 2015.