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Le prix de la fixité : Application à l'Union monétaire des Caraïbes orientales et à la Zone franc

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  • Romain Veyrune
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    Abstract

    Governments abandon the exchange rate flexibility in order to enhance the credibility of monetary policy and to achieve the stabilization of inflation. This policy is not costless because of the risk of real appreciation. The "hard peg" solutions ?the exchange rate unions (Bordo and Jonung, 1999) ?alleviate most of the causes of real appreciation. In compensation, when a deviation of the real exchange rate from the long term equilibrium occurs, they use an automatic adjustment mechanism funded upon deflation. The cost on conjuncture of deflationary pressures depends on nominal rigidities which are themselves influenced by the size of the economies. The countries belonging to the Franc Zone are freed of fixity constraints thanks to the borrowing facilities of the compte d?pérations. Indeed, they avoid the conjectural cost of temporary real exchange rate deviations, but they stay sensitive to inflationary chocks due to the government.

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    Bibliographic Info

    Article provided by De Boeck Université in its journal Mondes en développement.

    Volume (Year): 130 (2005)
    Issue (Month): 2 ()
    Pages: 63-76

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    Handle: RePEc:cai:meddbu:med_130_0063

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    Web page: http://www.cairn.info/revue-mondes-en-developpement.htm

    Related research

    Keywords: currency board; Franc Zone; deflation; real exchange rate misalignment;

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    1. Buiter, Willem H, 2003. "Deflation: Prevention and Cure," CEPR Discussion Papers 3869, C.E.P.R. Discussion Papers.
    2. Peter Isard & Hamid Faruqee, 1998. "Exchange Rate Assessment," IMF Occasional Papers 167, International Monetary Fund.
    3. Taimur Baig & Jörg Decressin & Tarhan Feyzioglu & Manmohan S. Kumar & Chris Faulkner-MacDonagh, 2003. "Deflation," IMF Occasional Papers 221, International Monetary Fund.
    4. Atish R. Ghosh & Anne-Marie Gulde & Holger C. Wolf, 2000. "Currency boards: More than a quick fix?," Economic Policy, CEPR & CES & MSH, vol. 15(31), pages 269-335, October.
    5. Stanley Fischer, 2001. "Exchange Rate Regimes: Is the Bipolar View Correct?," Journal of Economic Perspectives, American Economic Association, vol. 15(2), pages 3-24, Spring.
    6. Michael D. Bordo & Lars Jonung, 1999. "The Future of EMU: What Does the History of Monetary Unions Tell Us?," NBER Working Papers 7365, National Bureau of Economic Research, Inc.
    7. Ping HUA & Sylviane GUILLAUMONT JEANNENEY, 2003. "Real exchange rate and productivity in China," Working Papers 200328, CERDI.
    8. George A. Akerlof & William R. Dickens & George L. Perry, 1996. "The Macroeconomics of Low Inflation," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 27(1), pages 1-76.
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