What does a G-3 target zone mean for emerging-market economies?
AbstractThis paper examines the argument for a G-3 exchange rate target zone strictly from an emerging market perspective. A commitment to damping G-3 exchange rate fluctuations, however, requires a willingness on the part of G-3 authorities to use domestic monetary policy to that end. Under a system of target zones, then, relative prices for emerging market economies may become more stable, but debt-servicing costs may become less predictable. We use a simple trade model to show that the resulting consequences for welfare are ambiguous.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 14099.
Date of creation: Oct 2000
Date of revision:
exchange rates interest rates volatility trade debt servicing;
Find related papers by JEL classification:
- F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission
- F40 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - General
- F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
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