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Currency Crises and Monetary Policy Rules by eeeeewwwwwwwwssssssssss is a document available to read on EtoBox.
This working paper studies optimal monetary policy rules for central banks facing foreign investor behavior and self-fulfilling expectations that can trigger currency crises. The paper develops a model where central banks set monetary policy by targeting inflation, output, and foreign reserve levels. Including foreign reserves as a target can help central banks avoid currency crises caused by investor panic and currency runs, while also influencing output, inflation, exchange rates and reserve levels. The p
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