And third, I discuss whether in an inflation targeting regime the exchange
rate should affect the monetary policy rule. I point out that, from an
analytical perspective, this is still an unresolved issue. At the policy level,
very few IT central banks openly recognize using the exchange rate as a
(separate) term in their policy rules (i.e. Taylor rules). However, existing
empirical evidence suggests that almost every central bank does take
exchange rate behavior into account when undertaken monetary policy.5