Managing External Volatility: Policy Frameworks in Non-Reserve Issuing Economies


Helene Poirson Ward ; Nathan Porter ; Ghada Fayad ; Itai Agur ; Ran Bi ; Jiaqian Chen ; Johannes Eugster ; Stefan Laseen ; Jeta Menkulasi ; Kenji Moriyama ; Celine Rochon ; Katsiaryna Svirydzenka ; Camilo E Tovar Mora ; Zhongxia Zhang ; Aleksandra Zdzienicka

Publication Date:

December 18, 2020

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Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.


Since the global financial crisis, non-reserve-issuing economies (NREs) have been highly sensitive to episodes of external pressures. With monetary policy independence constrained by this sensitivity, many NREs have utilized other policy instruments. This paper confirms the vulnerability of NREs to external shocks and finds that in some circumstances managing such shocks with multiple instruments can both lessen the policy response required from any one policy tool to financial and external shocks and increase the effectiveness of policies in stabilizing macro-financial conditions. Effectiveness however does not always imply appropriateness, which rests on an evaluation of potential trade-offs and unintended consequences.


Working Paper No. 2020/288





Publication Date:

December 18, 2020



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