Monetary policy spillovers under intermediate exchange rate regimes

Testing the international Trilemma traditionally relies on discretely classified exchange rate regimes. This simplification limits implications drawn for middle-ground policies like managed floats or basket pegs, and inhibits inference empirical shape of stability – monetary autonomy trade-off. To address these issues, this paper proposes a continuous measure flexibility estimating policy spillovers along entire spectrum peg intensities. Monetary generally increase with stability, even within middle ground policies, pegs diversify such spillovers. I then estimate trade-off using machine learning techniques, finding that relationship between is significantly non-linear in both advanced economies emerging markets. Specifically, partially targeting translates to disproportionately smaller larger For markets particular, active reserves management key mechanism associated non-linearities.