Type
Working paper
Title
Exchange Rates and Monetary Spillovers
In
BIS Working Papers
Author(s)
PLANTIN Guillaume - Département d'économie (Author)
SHIN Hyun Song - Princeton University (Author)
Editor
Bank for International Settlements
Collection
BIS Working Papers : 537
ISSN
16827678
Keywords
Currency appreciation, Capital flows, Global games
Abstract
EN
When does the combination of flexible exchange rates and inflation-targeting monetary policy guarantee insulation from global financial conditions? We examine a dynamic global game model of international investment flows where, for some combination of parameters, the unique equilibrium exhibits the observed empirical feature of prolonged episodes of capital inflows and appreciation of the domestic currency, followed by abrupt reversals where capital outflows go hand-in-hand with currency depreciation, a domestic bond market crash, and inflationary pressure.

BIBLIOGRAPHIC QUOTE
EXPORT