All courses are scheduled to take place at the JVI. Courses may have to be delivered virtually in case safe travel to and in-person training in Vienna is not possible. The decision to offer virtual instead of onsite training will be made within 5 weeks of the course start date.
TARGET GROUP | Junior to mid-level officials who work with exchange rate policy and analysis. Participants are expected to have an advanced degree in economics or equivalent professional experience and be comfortable with Microsoft Excel and Excel-based applications. Before taking this course, it is recommended that applicants take either the Financial Programming and Policies (FPP) or the Macroeconomic Diagnostics (MDS) course. Participants are expected to also have a working knowledge of Word, Excel, PowerPoint, and EViews.
DESCRIPTION | This course, presented by the Institute for Capacity Development, gives a comprehensive overview of exchange rate analysis and policy. Topics covered include:
• Key exchange rate concepts (real, nominal, bilateral, multilateral, spot, forward).
• Arbitrage and exchange rate conditions (uncovered interest rate parity, law of one price, purchasing power parity (PPP), relative PPP).
• Real exchange rate equilibrium; role of the (real) exchange rate in achieving internal and external balance; adjustment to overall equilibrium under floating and fixed exchange rate regimes.
• Link between the real exchange rate and growth; exchange rate growth strategies (undervaluation, Washington Consensus); the Balassa-Samuelson effect.
• Exchange rate regimes (taxonomy, choice of regime; benefits and costs of floating; the policy mix: impossible trinity; exchange rate regimes in historical context).
• Exchange rate policy and the policy mix (monetary policy independence; overvaluation; external adjustment; exchange rate volatility and financial stability; exchange rate regime and trade integration; nominal anchor; fiscal policy; capital controls).
• Practical Problems of Exchange Rate Policy in Developing and Emerging Market Economies (e.g., concerns of excessive exchange rate volatility; de jure vs. de facto regimes; competitiveness, price stability; exchange-rate pass-through; dollarization and currency mismatches; political economy of exchange rates; implementation of exchange rate policies; targets and instruments). Presentation of country cases.
• Transitions from rigid to flexible exchange rates regimes (motives; speed of transition; supporting elements: deep and liquid domestic FX markets, setting and regulation of derivatives markets, coherent intervention policy, choice of nominal anchor; transition sequence).
• FX interventions (sterilized and non-sterilized FX interventions; impact on monetary policy; motives for intervention; instruments used for intervention; channels and effectiveness of FX interventions; tactics of FX interventions; foreign exchange intervention communication policy, rules vs. discretion).
• Currency crisis (causes, role of macroeconomic and prudential policies).
• International reserve adequacy (ARA) metric.
• External Balance Assessment (EBA).
• Early warning system.
OBJECTIVES | Upon completion of this course, participants should be able to:
• Assess whether FX reserves are adequate using standard and new indicators of reserve adequacy.
• Assess the effectiveness of interventions in the FX market, using case studies of interventions.
• Measure the degree of real exchange rate misalignment using different models and methods, including the EBA.
• Construct systems for early warning of currency crises using data on nominal exchange rates and international reserves.
• Estimate the probability of experiencing a currency crisis using panel data econometric techniques.
• Describe the exchange rate regime choice and how country-specific features could influence the choice.
• Identify policy inconsistencies that may lead to currency crises.
• Identify policy measures to prevent them.