Exchange Rate Policy in Small Rich Economies

We look at the exchange rate policy choices and outcomes for small rich economies. Small rich economies face significant policy challenges due to proportionately greater economic volatility than larger economies. These economies usually choose some form of fixed exchange rate regime, particularly in...

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Bibliographic Details
Published in:Open economies review 2012-07, Vol.23 (3), p.421-445
Main Authors: Breedon, Francis, Pétursson, Thórarinn G., Rose, Andrew K.
Format: Article
Language:English
Subjects:
Central banks
Datasets
Development Economics
Economic crisis
Economic instability
Economic Policy
Economics
Economics and Finance
European Integration
Exchange rate policy
Exchange rates
Fixed exchange rates
Floating exchange rates
Foreign exchange rates
GDP
Gross Domestic Product
International Economics
International finance
Macroeconomics
Macroeconomics/Monetary Economics//Financial Economics
Monetary policy
Open economies
Per capita
Policy making
Population
Research Article
Small economies
Studies
Volatility
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Description
Summary:We look at the exchange rate policy choices and outcomes for small rich economies. Small rich economies face significant policy challenges due to proportionately greater economic volatility than larger economies. These economies usually choose some form of fixed exchange rate regime, particularly in the very small economies where the per capita cost of independent monetary policy is relatively high. When such countries do choose a free or managed floating regime, they appear to derive no benefit from those regimes; their exchange rate volatility seems to rise without any significant change in fundamental economic volatility. Thus, for these countries, floating exchange rates seem to create problems for policy makers without solving any.
ISSN:0923-7992
1573-708X
DOI:10.1007/s11079-011-9226-0