Training Catalog Course Details

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.