Training Program Course

This course gives a comprehensive overview of exchange rate analysis and policy. It explores key exchange rate concepts (real, nominal, bilateral, multilateral, spot, forward) and arbitrage conditions (UIP, law of one price, PPP, relative PPP); its role in achieving internal and external balance (adjustment to overall equilibrium under floating and fixed exchange rate regimes); its role in economic growth (undervaluation, Washington Consensus, the Balassa-Samuelson effect). The course also examines exchange rate policy regimes (taxonomy, impossible trinity) and associated policy mix (monetary policy independence, financial stability, fiscal policy, capital controls). Participants learn practical problems of exchange rate policy in developing and emerging market economies (concerns of excessive volatility; de jure vs. de facto regimes; competitiveness, price stability; exchange-rate pass-through; targets and instruments), transitions from rigid to flexible exchange rates regimes (motives; speed of transition; deep and liquid domestic FX markets, derivatives markets, coherent intervention policy, nominal anchor; transition sequence), and FX interventions (sterilized or non-sterilized; motivations, channels, effectiveness, instruments, tactics, policy communication). Additionally, the course discusses the causes of currency crises and the roles of macroeconomic and prudential policies. Finally, participants learn to assess reserve adequacy (ARA) and conduct an External Balance Assessment (EBA), along with utilizing an early warning system to navigate the complexities of exchange rate policy.