I'm not arguing that all countries should copy every detail of our inflation-targeting regime. But it is important that central banks follow policies that anchor inflation expectations and thus prevent a buildup of deflationary as well inflationary pressures. As I mentioned before, both Canada and the United Kingdom operate with a flexible exchange rate.
Much has been said recently about floating exchange rates in relation to certain Asian economies— China in particular—and global imbalances. The policies of some Asian economies to encourage export-led growth, including the fixing of their exchange rates to the U.S. dollar, have caused a buildup of large foreign exchange reserves, thus exacerbating global imbalances.