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Exchange Rate Policy (ERP)

Monetary, Exchange Rate, and Capital Account Policies

This course, presented by the Institute for Capacity Development, gives a comprehensive overview of exchange rate analysis and policy. Topics covered include:

  • Key exchange rate concepts (real, nominal, bilateral, multilateral, spot, forward).
  • Arbitrage and exchange rate conditions (uncovered interest rate parity, law of one price, purchasing power parity (PPP), relative PPP).
  • Real exchange rate equilibrium; role of the (real) exchange rate in achieving internal and external balance; adjustment to overall equilibrium under floating and fixed exchange rate regimes.
  • Link between the real exchange rate and growth; exchange rate growth strategies (undervaluation, Washington Consensus); the Balassa-Samuelson effect. 
  • Exchange rate regimes (taxonomy, choice of regime; benefits and costs of floating; the policy mix: impossible trinity; exchange rate regimes in historical context).
  • Exchange rate policy and the policy mix (monetary policy independence; overvaluation; external adjustment; exchange rate volatility and financial stability; exchange rate regime and trade integration; nominal anchor; fiscal policy; capital controls).
  • Practical Problems of Exchange Rate Policy in Developing and Emerging Market Economies (e.g., concerns of excessive exchange rate volatility; de jure vs. de facto regimes; competitiveness, price stability; exchange-rate pass-through; dollarization and currency mismatches; political economy of exchange rates; implementation of exchange rate policies; targets and instruments). Presentation of country cases.
  • Transitions from rigid to flexible exchange rates regimes (motives; speed of transition; supporting elements: deep and liquid domestic FX markets, setting and regulation of derivatives markets, coherent intervention policy, choice of nominal anchor; transition sequence). 
  • FX interventions (sterilized and non-sterilized FX interventions; impact on monetary policy; motives for intervention; instruments used for intervention; channels and effectiveness of FX interventions; tactics of FX interventions; foreign exchange intervention communication policy, rules vs. discretion).
  • Currency crisis (causes, role of macroeconomic and prudential policies).
  • International reserve adequacy (ARA) metric.
  • External Balance Assessment (EBA).
  • Early warning system.
Read More Topic : Monetary Exchange Rate and Capital Account Policies

    Target Audience

    Junior to mid-level officials who work with exchange rate policy and analysis.

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    Participants are expected to have an advanced degree in economics or equivalent professional experience and be comfortable with Microsoft Excel and Excel-based applications. Before taking this course, it is recommended that applicants take either the Financial Programming and Policies (FPP) or the Macroeconomic Diagnostics (MDS) course. Participants are expected to also have a working knowledge of Word, Excel, PowerPoint, and EViews.

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    Course Objectives

    Upon completion of this course, participants should be able to:

    • Assess whether FX reserves are adequate using standard and new indicators of reserve adequacy.
    • Assess the effectiveness of interventions in the FX market, using case studies of interventions.
    • Measure the degree of real exchange rate misalignment using different models and methods, including the EBA.
    • Construct systems for early warning of currency crises using data on nominal exchange rates and international reserves.
    • Estimate the probability of experiencing a currency crisis using panel data econometric techniques.
    • Describe the exchange rate regime choice and how country-specific features could influence the choice.
    • Identify policy inconsistencies that may lead to currency crises.
    • Identify policy measures to prevent them.
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    Syllabus: {9499CFFE-459C-4258-BB24-F1A572819BB1}

    This course presents a comprehensive overview of exchange rate analysis and policy. The first part of the course introduces key definitions and concepts used in exchange rate analysis, including that of real exchange rate misalignment. It then discusses how changes in the real exchange rate may affect external adjustment and growth. The second part focuses on macroeconomic volatility and capital flows. It analyzes the role of foreign exchange intervention and international reserve adequacy. The third part covers the macroeconomic policy tradeoffs under different exchange rate regimes and the main exchange rate policy challenges in developing and emerging market economies, such as the use of hybrid regimes, forced and unforced exits from pegs, and the reasons behind the so-called Fear-of-Floating. The fourth part looks into real exchange rate equilibrium and misalignment. It elaborates on and uses the External Balance Assessment (EBA) methodology to that end. Finally, before participants’ presentations, the course moves to currency crises. It presents the Early Warning System to monitor such events.
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    Upcoming Offering

    Start date End date Location Delivery Method Session No. Primary & (Interpretation) language Apply
    May 29, 2023 June 9, 2023 Vienna, Austria In-person Training JV 23.16 English (Russian) Deadline passed
    June 5, 2023 June 16, 2023 Ebene, Mauritius Virtual Training AT 23.24V English (French) Deadline passed
    November 13, 2023 November 23, 2023 Rabat, Morocco In-person Training CE 23.34 English Apply online by August 21, 2023
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    Apply Now - Application deadline approaching:

    IMF offers online training to government officials and the public. Click Learn more to find our current offerings.

    Consumer Price Index-Advanced (CPI-A)

    English (Russian) | August 21, 2023 - September 1, 2023 | In-person Training | Vienna, Austria

    Apply online by May 28, 2023

    Macroeconomic Diagnostics (MDS)

    English (French, Portuguese) | July 3-14, 2023 | In-person Training | Ebene, Mauritius

    Apply online by May 29, 2023

    Financial Markets and Instruments (FMI)

    English | August 21, 2023 - September 1, 2023 | In-person Training | Vienna, Austria

    Apply online by May 29, 2023

    Workshop on Corporate and Household Insolvency (CHI)

    English | July 24-28, 2023 | In-person Training | Singapore, Singapore

    Apply online by May 31, 2023

    Monetary Policy (MP)

    English | September 25, 2023 - October 6, 2023 | In-person Training | Singapore, Singapore

    Apply online by June 2, 2023