Advanced Search
MyIDEAS: Login to save this paper or follow this series

Currency Boards, Credibility, and Macroeconomic Behavior

Contents:

Author Info

  • Amadou N. R. Sy
  • Luis Rivera-Batiz

Abstract

Currency boards operate differently from standard pegs. The former exhibit greater currency stability and lower transaction costs, inflation, and nominal interest rates, but are limited in their use of devaluation. We extend Drazen and Masson’s (1994) signaling model to consider the choice between currency board arrangements and standard pegs. The model shows that currency boards’ effectiveness hinges on their credibility properties and that they can improve welfare even with high unemployment persistence. By reducing expected inflation and the negative employment effect arising from expected but unrealized inflation, currency boards can produce less unemployment than peg regimes that abstain from devaluation.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.imf.org/external/pubs/cat/longres.aspx?sk=3590
Download Restriction: no

Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 00/97.

as in new window
Length: 45
Date of creation: 01 Jun 2000
Date of revision:
Handle: RePEc:imf:imfwpa:00/97

Contact details of provider:
Postal: International Monetary Fund, Washington, DC USA
Phone: (202) 623-7000
Fax: (202) 623-4661
Email:
Web page: http://www.imf.org/external/pubind.htm
More information through EDIRC

Order Information:
Web: http://www.imf.org/external/pubs/pubs/ord_info.htm

Related research

Keywords: Currency boards; Exchange rates; currency board; exchange rate; exchange rate regimes; exchange rate regime; effective exchange rate; real effective exchange rate; real effective exchange rates; exchange rate appreciation; effective exchange rates; exchange rate stability; nominal exchange rate; fixed exchange rate; real exchange rate; foreign exchange; exchange rate volatility; currency crisis; fixed exchange rate regimes; exchange rate behavior; real exchange rate appreciation; exchange markets; central bank; foreign exchange markets; real exchange rate stability; currency unions; exchange rate policy; forward exchange; real exchange rates; flexible exchange rate; forward exchange rate; flexible exchange rate regime; foreign exchange market; fluctuating exchange rate; exchange rate fluctuation; currency values; nominal exchange rate stability; bilateral real exchange rate; alternative exchange rate regimes; fixed exchange rate regime; exchange rate instability; exchange rate devaluations; currency crises; classification of exchange rate; foreign exchange reserves; balance of payments; exchange rate changes; exchange reserves; nominal exchange rates; government deficits; exchange rate flexibility; log exchange rate; alternative exchange rate; exchange rate rigidity; short-term debt; currency areas; debt default; currency basket;

Other versions of this item:

Find related papers by JEL classification:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Graciela L. Kaminsky & Carmen M. Reinhart, 1996. "The twin crises: the causes of banking and balance-of-payments problems," International Finance Discussion Papers 544, Board of Governors of the Federal Reserve System (U.S.).
  2. Atish R. Ghosh & Anne-Marie Gulde & Jonathan D. Ostry & Holger C. Wolf, 1997. "Does The Nominal Exchange Rate Regime Matter?," Working Papers 97-09, New York University, Leonard N. Stern School of Business, Department of Economics.
  3. Barro, Robert J. & Gordon, David B., 1983. "Rules, discretion and reputation in a model of monetary policy," Journal of Monetary Economics, Elsevier, vol. 12(1), pages 101-121.
  4. Allan Drazen & Paul R. Masson, 1993. "Credibility of Policies versus Credibility of Policymakers," NBER Working Papers 4448, National Bureau of Economic Research, Inc.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Schmukler, Sergio L. & Serven, Luis, 2002. "Pricing currency risk : facts and puzzles from currency boards," Policy Research Working Paper Series 2815, The World Bank.
  2. Urmas Sepp & Raoul Lättemäe & Martti Randveer, 2002. "The History and Sustainability of the CBA in Estonia," Macroeconomics 0212002, EconWPA.
  3. Daianu, Daniel & Vranceanu, Radu, 2003. "Subduing High Inflation In Romania. How To Better Monetary And Exchange Rate Mechanisms?," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(3), pages 5-36, September.
  4. Gregor Irwin, 2001. "Currency Boards and Currency Crises," Economics Series Working Papers 65, University of Oxford, Department of Economics.
  5. Ying Wu, 2005. "Determining a Modified Currency Board's Two-Period Exchange Rate Strategy," International Advances in Economic Research, Springer, vol. 11(4), pages 347-357, November.
  6. Fuchun Jin, 2002. "A Model to Analyze the Macroeconomic Interdependence of Hong Kong with China and the United States," Working Papers 062002, Hong Kong Institute for Monetary Research.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:imf:imfwpa:00/97. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Jim Beardow) or (Hassan Zaidi).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.