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The competitive real exchange-rate regime, inflation and monetary policy

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  • Frenkel, Roberto

Abstract

This article argues that in a stable and competitive real exchangerate(SCRER); macroeconomic regime, the exchange-rate component candrive up inflation through the very mechanisms that stimulate high rates ofgross domestic product and employment growth; to offset this pressure,fiscal and monetary policies will have to be used to control aggregatedemand. It finds that in an exchange-rate regime of this type, monetarypolicy has a degree of autonomy that can be exploited to apply activemonetary policies. It analyses the degree to which monetary policy canbe used to control aggregate demand and concludes that it cannot bearthe main responsibility for this, which means that fiscal policy ought to bethe main instrument for controlling aggregate demand.

Suggested Citation

  • Frenkel, Roberto, 2008. "The competitive real exchange-rate regime, inflation and monetary policy," Revista CEPAL, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL), December.
    • Handle: RePEc:ecr:col070:11346
    Note: Includes bibliography
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    File URL: http://repositorio.cepal.org/handle/11362/11346
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    References listed on IDEAS

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    1. Peter Bofinger & Timo Wollmershäuser, 2003. "Managed Floating as a Monetary Policy Strategy," Economic Change and Restructuring, Springer, vol. 36(2), pages 81-109, June.
    2. Frenkel, Roberto & Ros, Jaime, 2006. "Unemployment and the real exchange rate in Latin America," World Development, Elsevier, vol. 34(4), pages 631-646, April.
    3. Luis Miguel Galindo & Jaime Ros, 2008. "Alternatives to inflation targeting in Mexico," International Review of Applied Economics, Taylor & Francis Journals, vol. 22(2), pages 201-214.
    4. Roberto Frenkel & Martin Rapetti, 2008. "Five years of competitive and stable real exchange rate in Argentina, 2002-2007," International Review of Applied Economics, Taylor & Francis Journals, vol. 22(2), pages 215-226.
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    Cited by:

    1. Libman, Emiliano, 2017. "Asymmetric Monetary and Exchange Rate Policies in Latin America," MPRA Paper 78864, University Library of Munich, Germany.
    2. Paredes, Gonzalo J., 2017. "Ecuador: why exit dollarization?," Revista CEPAL, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL), April.
    3. Roberto Frenkel & Martin Rapetti, 2012. "External Fragility or Deindustrialization: What is the Main Threat to Latin American Countries in the 2010s?," World Economic Review, World Economics Association, vol. 2012(1), pages 1-37, September.
    4. Alberto Botta, 2014. "The Macroeconomics of a Financial Dutch Disease," DEM Working Papers Series 089, University of Pavia, Department of Economics and Management.
    5. Rapetti Martin, 2013. "Macroeconomic Policy Coordination in a Competitive Real Exchange Rate Strategy for Development," Journal of Globalization and Development, De Gruyter, vol. 3(2), pages 1-31, March.
    6. Frenkel, Roberto & Rapetti, Martin, 2014. "The real exchange rate as a target of macroeconomic policy," MPRA Paper 59335, University Library of Munich, Germany.
    7. Juan Antonio Montecino & Jose Antonio Cordero, 2010. "Capital Controls and Monetary Policy in Developing Countries," CEPR Reports and Issue Briefs 2010-10, Center for Economic and Policy Research (CEPR).
    8. Pramanik, Subhajit, 2021. "Exchange rate and Economic Growth - a comparative analysis of the possible relationship between them," MPRA Paper 111504, University Library of Munich, Germany, revised May 2021.
    9. Ugurlu, Esra Nur & Razmi, Arslan, 2023. "Political economy of real exchange rate levels," Journal of Comparative Economics, Elsevier, vol. 51(3), pages 918-940.
    10. Damill, Mario & Frenkel, Roberto, 2012. "Macroeconomic Policies, Growth, Employment, and Inequality in Latin America," WIDER Working Paper Series 023, World Institute for Development Economic Research (UNU-WIDER).
    11. Naved Hamid & Azka Sarosh Mir, 2017. "Exchange Rate Management and Economic Growth: A Brewing Crisis in Pakistan," Lahore Journal of Economics, Department of Economics, The Lahore School of Economics, vol. 22(Special E), pages 73-110, September.
    12. repec:unu:wpaper:wp2012-23 is not listed on IDEAS
    13. Karsten Kohler & Engelbert Stockhammer, 2023. "Flexible exchange rates in emerging markets: shock absorbers or drivers of endogenous cycles?," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 32(2), pages 551-572.
    14. repec:wea:worler:v:2012:y:2012:i:1:p:3 is not listed on IDEAS
    15. Frenkel, Roberto & Rapetti, Martín, 2012. "Exchange rate regimes in the major Latin American countries since the 1950s: lessons from history," Revista de Historia Económica / Journal of Iberian and Latin American Economic History, Cambridge University Press, vol. 30(1), pages 157-188, January.
    16. Mario Damill & Roberto Frenkel, 2012. "Macroeconomic Policies, Growth, Employment, and Inequality in Latin America," WIDER Working Paper Series wp-2012-023, World Institute for Development Economic Research (UNU-WIDER).
    17. Ros, Jaime, 2012. "Institutional and policy convergence with growth divergence in Latin America," Estudios y Perspectivas – Sede Subregional de la CEPAL en México 4923, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL).

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