91Ó°ÊÓ

Questions marked with an asterisk are answered at the end of the book in an appendix, "Answers to Selected Questions and Problems." What are the benefits of using a nominal anchor for the conduct of monetary policy?

Give an example of the time-consistency problem that you experience in your everyday life.

What are the key advantages of exchange-rate targeting as a monetary policy strategy?

Why may the disadvantage of exchange-rate targeting of not having an independent monetary policy be less of an issue for emerging market countries than for industrialized countries?

How can the long-term bond market help reduce the time-consistency problem for monetary policy? Can the foreign exchange market also perform this role?

When is exchange-rate targeting likely to be a sensible strategy for industrialized countries? When is exchange-rate targeting likely to be a sensible strategy for emerging market countries?

What are the advantages and disadvantages of a currency board over a monetary policy that just uses an exchange-rate target?

What are the key advantages and disadvantages of dollarization over other forms of exchange-rate targeting?

What are the advantages of monetary targeting as a strategy for the conduct of monetary policy?

What methods have inflation-targeting central banks used to increase communication with the public and increase the transparency of monetary policymaking?