Currency Fluctuations, Liability Dollarization, and the Choice of Exchange Rate Regimes in Emerging Markets
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Bibliographic InfoPaper provided by Bank of Canada in its series Working Papers with number 02-6.
Length: 32 pages Abstract: Traditional models of exchange rate regimes ignore the destabilizing effects of sharp and unanticipated exchange rate movements. Recent research, however, has shown that these movements have real costs in emerging markets owing to liability dollarization, financial fragility, or balance-sheet vulnerabilities. This paper evaluates the performance of an emerging-market economy under a credibly fixed-rate, a collapsing fixed-rate, and a flexible-rate regime using a speculative attack model that takes into account the destabilizing effects of unanticipated movements in exchange rates. The model is applied to South Korea to determine the dominant exchange rate regime.
Date of creation: 2002
Date of revision:
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Exchange rate regimes;
Find related papers by JEL classification:
- F31 - International Economics - - International Finance - - - Foreign Exchange
- F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
- E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
This paper has been announced in the following NEP Reports:
- NEP-ALL-2002-07-04 (All new papers)
- NEP-FIN-2002-07-04 (Finance)
- NEP-IFN-2002-07-04 (International Finance)
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