Using monetary policy to combat exchange rate volatility, including through the adoption of a fixed exchange rate regime, leads to greater volatility of employment, output, and inflation. In other words, the "cure" for exchange rate volatility is worse than the disease. This finding is demonstrated in economic models, in historical case studies, and in statistical analysis of many studies. In this seminar, Dr. Gagnon will address the reasons why volatile exchange rates do not destabilize inflation and output.

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