• External shocks resulting from spillover effects will normally be absorbed to a significant extent through exchange rate adjustments in those countries with flexible rate regimes. The empirical evidence shows that after a certain threshold the depreciation of a currency can have non-linear effects on inflation and other macroeconomic variables.
6 • A situation of uncertainty, like the one we face today, enhances the case for policy cooperation, since by increasing volatility it is equivalent to an additional spillover effect. Which are the possible areas for enhanced international monetary cooperation?