Dirty Floating in Emerging Markets

Central banks are supposed to use the interest rate to achieve an inflation target and let the exchange rate float freely. So why do they often intervene in currency markets by buying and selling international reserves, and use a host of other measures to limit their currencies’ volatility?

https://www.project-syndicate.org/commentary/emerging-market-central-banks-exchange-rate-intervention-by-andres-velasco-2019-05

Andrés Velasco, a former presidential candidate and finance minister of Chile, is Dean of the School of Public Policy at the London School of Economics and Political Science. He is the author of numerous books and papers on international economics and development, and has served on the faculty at Harvard, Columbia, and New York Universities.

Project-Syndicate

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