Which Currency Exchange Regime for Emerging Markets? Corner Solutions under Question
AbstractDuring the 90s, recurrent exchange rate crises in emerging markets have shown the extreme fragility of soft pegs, the so-called intermediate exchange rate regimes. As a result, numerous academic economists but also International institutions have promoted a new consensus: domestic authorities have to choose their exchange rate regime between only two solutions called corner solutions or extreme regimes: hard pegs or independent floating. This paper questions de relevance of this consensus. We stress the main advantages and costs of each corner solution. We conclude by stressing that intermediate regimes associated to an inflation targeting framework seem a better solution for emerging countries than corner solutions.
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Bibliographic InfoArticle provided by Savez ekonomista Vojvodine, Novi Sad, Serbia in its journal Panoeconomicus.
Volume (Year): 54 (2007)
Issue (Month): 4 (December)
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Web page: http://www.panoeconomicus.rs/
Soft peg; Hard peg; Corner solution; Inflation targeting;
Find related papers by JEL classification:
- F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
- F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
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