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"There are countries within the G20 that actually set exchange rate targets.
He did not call for exchange rate targets but there will be international concern that, as countries jostle for export markets, a battle over currencies will follow.
This is because of the implications of the Mundell Fleming model, which implies a central bank cannot (without capital controls) maintain interest rate and exchange rate targets simultaneously, because increasing the money supply results in a depreciation of the currency.
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but the Treasury report rules out setting an exchange rate target, arguing experience shows targets "lead to less, not more stability, in the medium term".
There was no exchange rate target to defend; better still for governments, creditors proved remarkably tolerant when lending to countries with currencies that tended to depreciate.
Some countries have adopted a flexible inflation targeting framework, while others have pursued exchange rate targeting.
Starting in 2004, the central bank moved away from exchange rate targeting and transitioned to monetary targeting.
Our model is consistent with central banks' practice of rationing access to marginal facilities when the objective of stabilizing short-term interest rates conflicts with another high-frequency objective, such as an exchange rate target.
In a comparison of monetary policy rules which allow for differential degrees of exchange rate targeting, it is found that a rule in which both countries engage in a cooperative exchange rate peg welfare-dominates a rule which allows the exchange rate to float endogenously (as well as a one-sided peg).
The report, which was produced by the U.N. conference on Trade and Development, stated that a viable solution to the exchange-rate problem would be a system of managed flexible exchange rates targeting a rate that is consistent with a sustainable current-account position.
Conversely, the view that exchange-rate targets are unworkable implies that intervention is a waste of time.
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CEO of Professional Science Editing for Scientists @ prosciediting.com