The tool of foreign exchange interventions to help stabilize price should be in the policymaker’s toolbox. However, there are some “buts” with a capital B that, if left unheeded, will abort policymaker’s measures to stabilize the economy.
Economist Questions Government’s Foreign Exchange Interventions
Economist Questions Government’s Foreign Exchange Interventions
You can’t reject the proposition that price expectations will be subject to change when foreign exchange rates increase. You also cannot deny that when the monetary policymaking framework is weak, the communication policy does not work effectively and the monetary policymaker does not have an effective nominal anchor to control expectations.