Benefits And Costs Of Fixed Exchange Rate Regime
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Author | : Jalal Mounir Shazbek |
Publisher | : |
Total Pages | : 106 |
Release | : 2007 |
Genre | : |
ISBN | : |
The Project will be on the benefits and costs of fixed exchange rate regimes. Af ter a general Introduction, Chapter 2 will include a general review of the liter ature on fixed exchange rate regimes in the world and the countries applying the se regimes. Chapter 3 will make a comparison between fixed and flexible regimes and what are the advantages and disadvantages of each. In chapter 4, I will take a specific country case study and will analyze the effects of a fixed exchange rate regime on this specific economy. Chapter 5 will conclude the project with s ome policy implications.
Author | : Shantayanan Devarajan |
Publisher | : World Bank Publications |
Total Pages | : 37 |
Release | : 1991 |
Genre | : Economics |
ISBN | : |
Fixed exchange rates have been a bad bargain for the CFA member countries. Under reasonable tradeoffs between output and inflation, these countries would have been better off having the flexibility to adjust to external shocks.
Author | : Joseph E. Gagnon |
Publisher | : Peterson Institute |
Total Pages | : 301 |
Release | : 2011 |
Genre | : Business & Economics |
ISBN | : 0881326356 |
Volatile exchange rates and how to manage them are a contentious topic whenever economic policymakers gather in international meetings. This book examines the broad parameters of exchange rate policy in light of both high-powered theory and real-world experience. What are the costs and benefits of flexible versus fixed exchange rates? How much of a role should the exchange rate play in monetary policy? Why don't volatile exchange rates destabilize inflation and output? The principal finding of this book is that using monetary policy to fight exchange rate volatility, including through the adoption of a fixed exchange rate regime, leads to greater volatility of employment, output, and inflation. In other words, the "cure" for exchange rate volatility is worse than the disease. This finding is demonstrated in economic models, in historical case studies, and in statistical analysis of the data. The book devotes considerable attention to understanding the reasons why volatile exchange rates do not destabilize inflation and output. The book concludes that many countries would benefit from allowing greater flexibility of their exchange rates in order to target monetary policy at stabilization of their domestic economies. Few, if any, countries would benefit from a move in the opposite direction.
Author | : Shantayanan Devarajan |
Publisher | : |
Total Pages | : 44 |
Release | : 1991 |
Genre | : Economics |
ISBN | : |
Author | : Mr.Kenneth Rogoff |
Publisher | : International Monetary Fund |
Total Pages | : 85 |
Release | : 2003-12-01 |
Genre | : Business & Economics |
ISBN | : 1451875843 |
Using recent advances in the classification of exchange rate regimes, this paper finds no support for the popular bipolar view that countries will tend over time to move to the polar extremes of free float or rigid peg. Rather, intermediate regimes have shown remarkable durability. The analysis suggests that as economies mature, the value of exchange rate flexibility rises. For countries at a relatively early stage of financial development and integration, fixed or relatively rigid regimes appear to offer some anti-inflation credibility gain without compromising growth objectives. As countries develop economically and institutionally, there appear to be considerable benefits to more flexible regimes. For developed countries that are not in a currency union, relatively flexible exchange rate regimes appear to offer higher growth without any cost in credibility.
Author | : Patrick A. Imam |
Publisher | : International Monetary Fund |
Total Pages | : 48 |
Release | : 2010-01-01 |
Genre | : Business & Economics |
ISBN | : 1451962002 |
In this paper we first explain why most microstates (countries with less than 2 million inhabitants) have gained independence only in the last 30 years. Despite the higher costs and risks microstates face, their ability to better accommodate local preferences combined with a more integrated world economy probably explains why the benefits of independence have risen. We explain why microstates at independence have chosen either dollarization, currency board arrangements, or fixed exchange rates rather than more flexible forms of exchange rate systems. We then, using the Geweke-Hajvassiliou-Keane multivariate normal simulator, model empirically the determinants of each of the different fixed exchange rate regimes in microstates and analyze the policy implications.
Author | : Mr.Paul R. Masson |
Publisher | : International Monetary Fund |
Total Pages | : 28 |
Release | : 1994-05-01 |
Genre | : Business & Economics |
ISBN | : 1451971818 |
Standard models of policy credibility, defined as the expectation that an announced policy will be carried out, emphasize the preferences of the policymaker, and the role of tough policies in signalling toughness and raising credibility. Whether a policy is carried out, however, will also reflect the state of the economy. We present a model in which a policymaker maintains a fixed parity in good times, but devalues if the unemployment rate gets too high. Our main conclusion is that if there is persistence in unemployment, observing a tough policy in a given period may lower rather than raise the credibility of a no-devaluation pledge in subsequent periods. We test this implication on data for the interest rate differential between France and Germany and find support for our hypothesis.
Author | : Gabriel De Kock |
Publisher | : |
Total Pages | : 56 |
Release | : 1992 |
Genre | : Fiscal policy |
ISBN | : |
Author | : Jeffry A. Frieden |
Publisher | : Princeton University Press |
Total Pages | : 318 |
Release | : 2014-12-28 |
Genre | : Business & Economics |
ISBN | : 1400865344 |
The politics surrounding exchange rate policies in the global economy The exchange rate is the most important price in any economy, since it affects all other prices. Exchange rates are set, either directly or indirectly, by government policy. Exchange rates are also central to the global economy, for they profoundly influence all international economic activity. Despite the critical role of exchange rate policy, there are few definitive explanations of why governments choose the currency policies they do. Filled with in-depth cases and examples, Currency Politics presents a comprehensive analysis of the politics surrounding exchange rates. Identifying the motivations for currency policy preferences on the part of industries seeking to influence politicians, Jeffry Frieden shows how each industry's characteristics—including its exposure to currency risk and the price effects of exchange rate movements—determine those preferences. Frieden evaluates the accuracy of his theoretical arguments in a variety of historical and geographical settings: he looks at the politics of the gold standard, particularly in the United States, and he examines the political economy of European monetary integration. He also analyzes the politics of Latin American currency policy over the past forty years, and focuses on the daunting currency crises that have frequently debilitated Latin American nations, including Mexico, Argentina, and Brazil. With an ambitious mix of narrative and statistical investigation, Currency Politics clarifies the political and economic determinants of exchange rate policies.
Author | : Michael B. Devereux |
Publisher | : |
Total Pages | : 66 |
Release | : 1998 |
Genre | : Consumption (Economics) |
ISBN | : |
We investigate the welfare properties of fixed and floating exchange rate regimes in a two-country, dynamic, infinite-horizon model with agents optimizing in an environment of uncertainty created by monetary shocks. The optimal exchange rate regime may depend on whether prices are set in the currency of producers or the currency of consumers. When prices are set in consumers' currency, the variance of home consumption is not influenced by foreign monetary variance under floating exchange rates, while there is transmission of foreign disturbances under floating rates if prices are set in producers' currencies, or under fixed exchange rates. An important feature of the model is the exchange rate regime affects not just the variance of consumption and output, but also their average levels. When prices are set in producer's currency, as in the traditional framework, we find that there is a trade-off between floating and fixed exchange rates. Exchange rate adjustment under floating rates allows for a lower variance of consumption, but exchange rate volatility itself leads to a lower average level of consumption. When prices are set in consumer's currency, floating exchange rates always dominate fixed exchange rates.