Economics, Econometrics and Finance
4 years ago

Exchange rate flexibility in Japan leads to monetary policy pitfalls

China Economic Review
A role model for China? Exchange rate flexibility and monetary policy in Japan
Christian Danne, Gunther Schnabl

Paper Summary

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The article looks at how Japan's monetary policy changed when they switched from a fixed to a flexible exchange rate system. They found that when the yen got stronger, Japan tried to lower interest rates to stop it, but this led to problems. The lesson for China is to keep their exchange rate fixed to the dollar.