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w1255 Real Exchange Rate Effects of Fiscal Policy National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900 ; email: info@nber.org Contact Us 2010/07/01. Monetary policy under flexible exchange rates - an introduction to inflation targeting. monetary policy;inflation targeting;Exchange Rates;rate of increase in prices;nominal exchange rate;fluctuation in interest rates;inflation targeting regime;movement Flexible exchange rate Flexible exchange rates can be defined as exchange rates determined by global supply and demand of currency. In other words, they are prices of foreign exchange determined by the market, that can rapidly change due to supply and demand, and are not pegged nor controlled by central banks.

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