Uncovering Central Bank's Monetary Policy Objectives: Going Beyond Fear of Floating

Research output: Working paper


Highly volatile exchange rate don't come cheap in economies with large liability dollarization ratios. Therefore, central banks do no follow a unique objective of price stability but its preferences include an implicit exchange rate objective. This gives us reasons to believe that the Peruvian exchange rate could be characterized as a phony floater. We found evidence suggesting an implicit defense on the level of the exchange rate. Going beyond the argument of fear of floating as a key explanation for this, we explore the reason behind the fear and the need of following certain objectives in liability dollarized economies.
Original languageEnglish
Place of PublicationRochester, NY
StatePublished - 1 Oct 2000


  • central bank preferences
  • dollarization
  • floating exchange rates
  • Peru

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