Unconventional Monetary Policies: FX Intervention Strategies (FXIS) and Yield Curve Control (YCC)

The Fed recently improved its Flexible-Inflation-Targeting framework (FIT) by adopting Average-Inflation Targeting (AIT). Under AIT the Fed aims to achieve an inflation rate that is, on average, close to their 2 percent long-term target. This policy will incentivize the Fed to plan to overshoot its long-term 2 percent inflation target after it is hit by a sequence of contractionary shocks that creates states for the U.S. economy characterized with large economic slack and inflation significantly below their 2% long-term target (e.g. GFC and Covid19-related shocks). 


This new monetary policy framework combined with strongly expansionary fiscal policies has resulted in a large depreciation in the U.S. dollar as financial-market participants have revised up their expected path of the future U.S. price level relative to other countries. The associated exchange rate appreciations and increases in long-term interest rates in many countries has been problematic as central banks are also dealing with high unemployment, economic slack and underlying inflationary pressures significantly below target.  Unfortunately, many of the central banks in these countries are at the Effective Lower Bound (ELB) and need to consider other policy instruments to replace the policy space lost by hitting the ELB. 


This course considers 2 fool-proof strategies for avoiding (or escaping!) low inflation traps. It starts with providing a review of the costs of getting stuck in low inflation traps and how these problems have been exacerbated by central banks not keeping up with other Flexible-Inflation-Targeting (FIT) central banks such as the Fed. We then provide a user-friendly analytical framework based on DYNARE that allows central-bank modelers and researchers to easily solve forward-looking models with a rich variety of nonlinearities including nasty occasionally-binding constraints. In particular, this allows us to study the implications of Yield-Curve Control (YCC) and FX Intervention Strategies (FXIS) that are designed to avoid or escape low inflation traps. The new analytical framework will also be useful to central banks that are interested in making preparations to move their Forecasting and Policy Analysis Systems (FPAS) to much more cost-effective and efficient solution software that is based on open-source software. 


The modeling framework will be initially available in Dynare/Matlab but is being developed in open source software (Dynare/Julia).


The latter will increase the potential for even higher levels of central-bank transparency as it will be much easier to replicate central bank forecasts and risk assessments. See the course on how to improve monetary policy transparency and join the club of the most transparent central banks in the world.


This course will last 4 days. Participants will have access to 4 hours of training each day. The courses are organized to focus on the needs of each central bank. 

Don't worry! We will find a suitable time of the day for you. Participants will be divided into groups by their time zones.



  • Have at least intermediate knowledge in statistics and macroeconomics.

  • MATLAB 2020a or later versions. 

  • Latest version of Dynare (4.6.2).

  • Being an intermediate user of Dynare/Matlab would be an asset but no previous knowledge of it is required as there will be a special mini-course for beginners.

What will you learn?

  • Under what situations will FX intervention strategies be super credible and require very few interventions in the initial phase and how central banks can efficiently manage their exit strategy.

  • How to extend the basic open economy model to include using an exchange rate floor for stabilization objectives (output and inflation).

  • How to design and implement a framework for central-bank communications.

  • Numerical solution methods for solving Mixed Complementarity Problem (MCP) that arise because of occasionally-binding constrains (e.g. ELB, YYC, FXIS).


The outcomes from the course:


  • Principles of good FX intervention strategies.

  • Full package of model code.

  • Certificate of completion.

  • Further assistance (subject to discussion).

Reading Material




High-Income Countries -- €1000

Middle-Income Countries -- €500

Low-Income Countries -- €250

Price for 1 Participant

Countries are classified by income using new "World Bank country classifications by income level: 2020-2021." Find the World Bank tables here.