Carry Trade and Exchange Rate Regimes
AbstractCarry trade activities and foreign participation in local currency bonds in emerging countries have increased dramatically during the last decade. In line with this observation, we revisit the question of optimal exchange rate regime when developing countries can borrow internationally with local currency denominated debt. We obtain that a “pseudo flexible regime”, in which the country accumulates reserves in conjunction with debt, is the best policy alternative under real external shocks.
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Bibliographic InfoPaper provided by University of São Paulo (FEA-USP) in its series Working Papers, Department of Economics with number 2012_05.
Date of creation: 05 Apr 2012
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Find related papers by JEL classification:
- F31 - International Economics - - International Finance - - - Foreign Exchange
- F34 - International Economics - - International Finance - - - International Lending and Debt Problems
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