Since trying to lower inflation will have some undesirable consequences, such as currency appreciation, which hurts exports, should governments and central banks keep hands off on inflation? But exports would become uncompetitive anyway when inflation is high (as prices increase). In a high inflation scenario, what should government or central bank do to protect exports (in an export dependent economy)?

  • $\begingroup$ This question contains a bias without an explicit context. Inflation is just a small factor on export competitiveness, and it must directly related to forex. Product must factor issues such as competitions and deterrents. $\endgroup$ – mootmoot Dec 14 '16 at 13:56

Yes, but only if you also introduce capital controls. You should check out the Mundell–Fleming trilemma:

The Impossible trinity (also known as the Trilemma) is a trilemma in international economics which states that it is impossible to have all three of the following at the same time:

  1. A fixed foreign exchange rate
  2. Free capital movement (absence of capital controls)
  3. An independent monetary policy

Wikipedia Impossible Trinity


No. There is a trade-off between lowering inflation and boosting exports. You can't have both. There is no magic bullet.

Note that with fully flexible exchange rates, high inflation does not hurt the export sector as the real exchange rate stays the same.

  • $\begingroup$ An increase in government spending can spur on inflation. $\endgroup$ – Jamzy Sep 20 '16 at 22:35

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