In my ICMB talk, I will offer a central bank practitioner’s perspective on exchange rate management. Denmark has fixed the DKK against the euro, and prior to that, the deutsche mark, since the 1980s, with remarkable success. I will discuss the main forces driving the exchange market pressures that we respond to when using our interest rate and intervention tools to secure a stable exchange rate. I will relate these to the experiences of other small open European economies with their own currencies and different exchange rate regimes. While many workhorse models of exchange rate determination link exchange rates to real economic transactions and net capital flows, I will argue that what matters for day-to-day exchange rate management are financial balances and gross financial transactions. In this light, it is important to understand the different drivers of gross foreign currency demand of different financial institutions, as well as the increasing role of global financial factors.

Unless otherwise specified, the lectures are given in English.

The entrance is free, no registration needed

Organised by the CIMB.