Managing External Volatility: Policy Frameworks in Non-Reserve Issuing Economies

43 Pages Posted: 26 Jan 2021

See all articles by Hélène Poirson

Hélène Poirson

International Monetary Fund (IMF) - Research Department

Nathan Porter

International Monetary Fund (IMF)

Ghada Fayad

International Monetary Fund (IMF)

Itai Agur

IMF

Ran Bi

International Monetary Fund (IMF)

Jiaqian Chen

International Monetary Fund (IMF)

Johannes L. Eugster

International Monetary Fund (IMF)

Stefan Laseen

Sveriges Riksbank - Monetary Policy Department

Jeta Menkulasi

International Monetary Fund (IMF)

Kenji Moriyama

International Monetary Fund (IMF)

Céline Rochon

International Monetary Fund (IMF)

Katsiaryna Svirydzenka

International Monetary Fund (IMF)

Camilo E. Tovar

International Monetary Fund

Zhongxia Zhang

International Monetary Fund (IMF)

Aleksandra Zdzienicka

International Monetary Fund (IMF)

Date Written: December 1, 2020

Abstract

Since the global financial crisis, non-reserve-issuing economies (NREs) have been highly sensitive to episodes of external pressures. With monetary policy independence constrained by this sensitivity, many NREs have utilized other policy instruments. This paper confirms the vulnerability of NREs to external shocks and finds that in some circumstances managing such shocks with multiple instruments can both lessen the policy response required from any one policy tool to financial and external shocks and increase the effectiveness of policies in stabilizing macro-financial conditions. Effectiveness however does not always imply appropriateness, which rests on an evaluation of potential trade-offs and unintended consequences.

JEL Classification: E44, E52, E58, F31, F32, F62, E43, E31

Suggested Citation

Poirson Ward, Helene and Porter, Nathaniel John and Fayad, Ghada and Agur, Itai and Bi, Ran and Chen, Jiaqian and Eugster, Johannes L. and Laseen, Stefan and Menkulasi, Jeta and Moriyama, Kenji and Rochon, Céline and Svirydzenka, Katsiaryna and Tovar, Camilo E. and Zhang, Zhongxia and Zdzienicka, Aleksandra, Managing External Volatility: Policy Frameworks in Non-Reserve Issuing Economies (December 1, 2020). IMF Working Paper No. 2020/288, Available at SSRN: https://ssrn.com/abstract=3772494

Helene Poirson Ward (Contact Author)

International Monetary Fund (IMF) - Research Department ( email )

700 19th Street NW
Washington, DC 20431
United States

Nathaniel John Porter

International Monetary Fund (IMF) ( email )

700 19th Street NW
Washington, DC 20431
United States

Ghada Fayad

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Itai Agur

IMF ( email )

700 19th Street NW
Washington, DC 20431
United States

HOME PAGE: http://itaiagur.weebly.com/

Ran Bi

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Jiaqian Chen

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Johannes L. Eugster

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Stefan Laseen

Sveriges Riksbank - Monetary Policy Department ( email )

S-103 37 Stockholm
Sweden

Jeta Menkulasi

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Kenji Moriyama

International Monetary Fund (IMF) ( email )

Céline Rochon

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Katsiaryna Svirydzenka

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Camilo E. Tovar

International Monetary Fund ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

HOME PAGE: http://blog-imfdirect.imf.org/bloggers/camilo-e-tovar/

Zhongxia Zhang

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Aleksandra Zdzienicka

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

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