Afghanistan Development Brief : Is Afghani/US dollar depreciation a problem for Afghanistan?

In this policy brief we discuss whether and to what extent recent currency depreciation is a problem for Afghanistan. We show that: i) depreciation against the US dollar has been modest and driven mostly be external factors; and ii) depreciation against the US dollar is not significantly driving inflation. Taking account of these realities, recent developments provide little justification for additional intervention aimed at stabilizing the afghani/US dollar exchange rate or any revisions to the overall monetary policy framework.