But this is merely to say that they have no coherent exchange-rate policy: monetary policy and exchange-rate policy (aside from occasional meddling) are operationally indivisible.
The central bank is supposed to be independent, and is also supposed to be in charge of exchange-rate and monetary policy.
"At the root of the euro upheaval is a balance of payment crisis caused by the cumulative effects of a 13-year-old one-size-fits-all monetary policy and a fixed exchange rate for a collection of disparate countries in very different stages of economic and structural development, " he argues.
Moreover, successful monetary union may sometimes require governments that have lost their monetary and exchange-rate flexibility to resort to a more flexible fiscal policy.
Growing deficits constrain the use of stimulus efforts to revive the economy, while Serbia's concerns about inflation and exchange rate stability preclude the use of expansionary monetary policy.
Even so, China could still introduce some flexibility into its exchange rate, and so regain control of monetary policy, by adopting a wider band or by pegging to a currency basket rather than just to the dollar.
ECONOMIST: It is time for China to unshackle the price of money
Mr. Abe has made it clear that Japan will pursue an aggressive policy of monetary expansion regardless of the monetary and exchange rate policies pursued in other countries.
The big exceptions are Taiwan, where the discount rate is less than 1.9%, and Singapore, which carries out monetary policy by setting a path for the exchange rate, not the interest rate.
Bank Indonesia is more pragmatic than the Bank of Thailand, widening the rupiah's exchange rate trading band to 8% and ensuring more flexibility in monetary policy.
The three key elements of this policy remained the adoption of a floating exchange rate system, the anchoring of monetary policy to the inflation target and the acceleration of banking sector reforms, he said.
For example, the Goldman Sachs monetary-conditions index (based on a weighted average of short-and long-term interest rates and the trade-weighted exchange rate) suggests that America's monetary policy is currently at its tightest since 1989, largely reflecting the strong dollar.
In an effort to obtain loans to service its debt, Seychelles in November 2008 signed a standby arrangement with the IMF that mandated floating the exchange rate, removing foreign exchange controls, cutting government spending, and tightening monetary policy.
He strangely ignored the fact that China's own overly lax monetary policy, partly the result of its fixed exchange rate, is fuelling bubbles in shares and property.
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The chief advantage is that this outlaws any national discretion in the conduct of monetary policy: interest rates and the money supply adjust automatically to changes in economic circumstances, with the exchange rate totally fixed.
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