06 June 2011

Working paper no. 53 published on the Central Bank's website

Working paper no. 53, "Exchange rate policy in small rich economies“, by Francis Breedon, Þórarinn G. Pétursson and Andrew K. Rose has been published.

This paper looks at the experience of different exchange rate policy choices for small economies. These economies usually choose some form of fixed exchange rate regime due to the relative high per capita cost of managing an independent monetary policy. When such countries do choose a flexible exchange rate regime, they appear to derive no benefit from those regimes; their exchange rate volatility seems to rise without any significant change in economic volatility in other fundamentals. Thus, a choice of a hard peg for these economies does not entail a rise in economic volatility.

See the Bank's Working Papers here: Working papers