The Mechanics of a Successful Exchange-Rate Peg: Lessons for emerging Markets
AbstractThis study seeks to determine if there were identifiable contrasts between the Austrian and Thai pegs that would have hinted at problems for Thailand prior to July 1997. The strategy is to first estimate a reaction function of a successful pegging country, i.e. Austria, to help identify salient features that made the Austrian peg credible. Next, the same model is applied to Thailand's monetary policy, an East Asian country that maintained one of the tightest pegs to the US dollar prior to its collapse. One lesson for pegging countries that emerges from the empirical results is that they ought to behave like assiduous inflation targeters even when there is no pressure on the exchange rate. A second lesson is that care is needed in choosing an anchor currency, because the major currencies experience wide swings against one another.
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Bibliographic InfoPaper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 2829.
Date of creation: Jun 2001
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Other versions of this item:
- Michael Dueker & Andreas M. Fischer, 2001. "The mechanics of a successful exchange rate peg: lessons for emerging markets," Review, Federal Reserve Bank of St. Louis, issue May, pages 47-56.
- Michael Dueker & Andreas Fischer, 2001. "The Mechanics of a successful Exchange-Rate Peg: Lessons from Emerging Markets," Working Papers 01.02, Swiss National Bank, Study Center Gerzensee.
- E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
- E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
- F31 - International Economics - - International Finance - - - Foreign Exchange
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