Exchange Rates and Insulation in Emerging Markets
This paper presents data on how flexible exchange rate regimes insulate emerging markets from external shocks. The findings are based on a study about whether or not flexible exchange rates can protect emerging markets from external shocks.
A number of recent theoretical and empirical studies cast doubt on the shock-mitigating benefits of exchange rate flexibility. In this paper, the authors cite and expound on a 2017 study showing that flexible exchange rates promote output and financial stability in the face of global shocks. The authors argue that exchange rate flexibility does provide insulation, and there is less robust evidence that limited flexibility is enough to insulate emerging markets from shocks.
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