To Peg or Not to Peg: A Template for Assessing the Nobler
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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.
Series:
Working Paper No. 2006/054
Subject:
Currencies Exchange rate adjustments Exchange rate flexibility Exchange rates Inflation
English
Publication Date:
February 1, 2006
ISBN/ISSN:
9781451863147/1018-5941
Stock No:
WPIEA2006054
Pages:
29
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