To Peg or Not to Peg: A Template for Assessing the Nobler

February 1, 2006

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Aasim M. Husain To Peg or Not to Peg: A Template for Assessing the Nobler, (USA: International Monetary Fund, 2006) accessed December 23, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

This paper proposes a template for assessing whether or not a country's economic and financial characteristics make it an appropriate candidate for a pegged exchange rate regime. The template employs quantifiable measures of attributes-trade orientation, financial integration, economic diversification, macroeconomic stabilization, credibility, and "fear-offloating" type effects-that have been identified in the literature as key potential determinants of regime choice. To illustrate, the template is applied to Kazakhstan and Pakistan. The results indicate a fairly strong case against a pegged regime in Pakistan. The implications for Kazakhstan are mixed, although changes in that economy in recent years strengthen the case against a peg.

Subject: Currencies, Exchange rate adjustments, Exchange rate flexibility, Exchange rates, Inflation

Keywords: Demand shock, Economic cycle, Regime choice, Trade orientation, WP

Publication Details

Pages:

29
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2006/054
Stock No:

WPIEA2006054
ISBN:

9781451863147
ISSN:

1018-5941

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