This presentation by Dmitry Mukhin (London School of Economics) is about optimal exchange rate policy. Exchange rates have two primary roles: firstly, to facilitate expenditure switching in the good market, and secondly, to allow for risk sharing in financial markets.
This research explores how an optimal exchange rate can be identified in the context of having a target, and then if not being a policy instrument, what mix of monetary policy, FX interventions and capital controls can achieve an optimal exchange rate? By building on a General Equilibrium model exchange rates, this research develops a rich framework for policy analysis.
The research question is ‘What is the optimal exchange rate policy?’