The proximate problem that a central bank faces is maintaining a reasonably stable exchange rate, a variable that captures not only the external sector imbalances but also the future expectations of the relevant fundamentals. Empirical studies show that, in the short run, exchange rates behave as asset prices and follow a “random walk”.
Even so, any sharp  1  Unfortunately, both these Committees’ report preceded financial crises, the East-Asian and the Global Financial Crisis, and hence their recommendations were not pursued as seriously as they would have been otherwise.