The monetary policy strategy that results in the loss of an independent monetary policy is

Question

Quizplus · Accepted Answer

Exchange-rate targeting involves using the exchange rate as the primary goal of monetary policy rather than controlling inflation or other economic indicators. This often requires a fixed exchange rate or a tightly managed exchange rate regime, which limits the ability of a central bank to conduct an independent monetary policy. This is because changes in the domestic interest rate may lead to changes in the exchange rate and may conflict with the exchange rate target. As a result, exchange-rate targeting can result in the loss of an independent monetary policy.

The Monetary Policy Strategy That Results in the Loss of an Independent