Thursday, June 4, 2015

Commodity Prices and the Exchange Rate Again

My friend Lars Christensen has a good post (video here) on oil prices and Middle East currency regimes (excerpt):

Talking to my phone: The Gulf States should peg their FX rates to oil prices

Oops I did it again – this time I talk to my phone about monetary policy in the Gulf States and my suggestion that these countries should peg their currencies to the oil price or a basket of the oil price and the US dollar. This is of course what I have suggested should be termed the Export Price Norm (EPN).

I’m posting this due to a conversation I had yesterday, trying to explain optimal exchange rate policy in the face of a terms of trade shock.

Lars has an older post on the Ringgit as well (here), along with thoughts on monetary policy, price controls and inflation.

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