International Economics and Economic Policy

, Volume 15, Issue 2, pp 331–352 | Cite as

Emerging and small open economies, unconventional monetary policy and exchange rates – a survey

  • Ansgar Belke
  • Christian Fahrholz
Original Paper


At the outset of the Great Recession emerging in 2007, central banks of major-currency economies have adopted non-standard monetary policies. We examine whether and to what extent these measures pose a challenge to central banking in emerging and small open economies. In particular we assess how global liquidity spillovers caused by major central banks affect the economic dynamics of emerging and small open economies. In this respect, economies which are close to or even at the periphery of major-currency economies are particularly prone to “unbalanced” real exchange rate dynamics. In the short run, corresponding level and volatility effects in key relative prices may endanger financial stability in the recipient country. The long-term effects include a metamorphosis of the anchoring of private-sector inflation expectations into a perilous tightrope act in central banking of these economies.


Real exchange rates Emerging and small open economies Central banking Great recession Spillovers 

JEL classification

E32 E44 E58 E65 


Compliance of ethical standards


The paper was written when the corresponding author was a visiting scholar at Eesti Pank, Tallinn, Estonia. The content is solely the responsibility of the authors and does not necessarily represent the official views of the DIHK.


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Copyright information

© Springer-Verlag GmbH Germany, part of Springer Nature 2017

Authors and Affiliations

  1. 1.University of Duisburg-EssenEssenGermany
  2. 2.CEPS BrusselsBrusselsBelgium
  3. 3.IZA BonnBonnGermany
  4. 4.DIHK, Deutscher Industrie- und Handelskammertag e. VBerlinGermany

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