Discussion about inflation is back, given the current international economic scenario. Hence, an understanding of the importance and implications of relationships among key variables, such as exchange rates, interest rates, stock prices, investments, employment generation, conduct of monetary policy and monetary hyperinflations assumes prominence, even as policymakers work towards ensuring all-round stability in their respective economies.

The relationship between stock prices and exchange rates is discussed in the paper titled, "Do Exchange Rates Cause Stock Prices, or Vice-Versa? Evidence from Malaysia". The writers, Mohd. Fahmi Ghazali, Siti Hajar Samsu, Ooi Ai Yee and Nelson Lajuni significantly covered the time period of the pre-1997-1998 East Asian crisis for this purpose. Their presentation draws interesting conclusions about the relationship between stock prices and exchange rates during both crises and normal periods.

The paper, "Currency Crises and Monetary Policy in Economies with Partial Dollarization of Liabilities" by Christian Proan~o, Peter Flaschel and Willi Semmler is a `crisis-period' study that captures the significance of the 1997-1998 East Asian crisis. As mentioned earlier, the importance of understanding and estimating the mutual impact of variables becomes crucial, more so in the conduct of monetary policy.

The Monetary Conditions Index (MCI) conditions the conduct of the monetary policy, as elucidated in the paper, "Does Credit Channel Matter in the Conduct of Monetary Policy in Singapore?" by Wai-Ching Poon. This paper also examines the impact of interest rate and exchange rate, and then builds a MCI.

Charting the right monetary policy in the context of a monetary crisis is a challenge for the policymakers, since they need to investigate the role of both planned and speculative decision-making that lend support to the destabilizing effects of hyperinflation. The paper, "Monetary Hyperinflations, Speculative Hyperinflations and Modeling the Use of Money", by Alexandre Sokic, provides an insight into this aspect of monetary policy.

During times of monetary crises, the hard fact is that volatilities become the cornerstone. A resilient path for such occasions has been spelt out in the paper, "Macroeconomic Fluctuations and Stabilization Policy Implications for Lesotho", by Powell L Mohapi and Matamatama C Mohapi. Understandably, key stabilization factors in the form of hedging against unfavorable exchange rate fluctuations, stimulating investment, and employment generation, dominates the discussion.

- Y G Sivaram,
Consulting Editor.