Jean-Pierre Allegret () (Groupe d Analyse et de Theorie Economique (UMR 5824 CNRS, Universites Lyon 2 et Lyon 1,ENS-LSH), France) Mohamed Ayadi () (Institut Superieur de Gestion, Universite de Tunis III, Tunisia) Leila Haouaoui () (Institut Superieur de Gestion, Universite de Tunis III, Tunisia)
Abstract
During the 90s emerging markets have been hit by recurrent exchange rate crises. Almost all these countries shared a common characteristic: they adopted in previous years soft pegs, the so-called intermediate exchange rate regimes. International institutions and academic economists interpreted this intrinsic fragility of soft pegs as a consequence of the increasing international capital mobility. From this perspective, the exchange-rate regime is seen as constrained by the monetary policy trilemma, which imposes a stark trade-off among exchange stability, monetary independence, and capital market openness. Soft pegs seem incompatible with international financial integration. As a result, a new consensus appeared: the choice of domestic authorities is limited to corner solutions: hard pegs on the one side; independent floating on the other side. This paper proposes a contribution to the analysis of exchange rate regimes choice by emerging markets. The new consensus is questioned by considering that emerging countries are confronted not in the choice between extreme solutions, but rather with the choice of the degree of fixity or the degree of flexibility- of the exchange rate.
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Publisher Info
Paper provided by Faculty of economics, Department of Economics in its series Working Papers with number
200732.
Length: 30 pages Date of creation: Sep 2007 Date of revision:
Sep 2007 Publication status: Published in Panoeconomicus, September 2007, pages 271-301 Handle: RePEc:voj:wpaper:200732
Find related papers by JEL classification: F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics