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Exchange rate policy in developing countries


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  • Corden, W. Max
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    A distinction can be made between two approaches to exchange rate policy in developing countries. The"real targets"and the"nominal anchor"approach. Part I of this report gives an overview of the two approaches and the assumptions they imply. Part II expounds the"real targets"approach and its implications in some detail. This is really the approach that is now orthodox. Part III expounds the"nominal anchor"approach and its implications, and considers to what extent it might explain the low inflation experiences of the many countries where exchange rates have been (more or less) fixed for long periods. Part IV considers the implications of increasing capital mobility for exchange rate policy, and Part V has some conclusions for policy. The paper draws on examples of exchange rate policies and experiences of a group of seventeen developing countries.

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    Paper provided by The World Bank in its series Policy Research Working Paper Series with number 412.

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    Date of creation: 30 Apr 1990
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    Handle: RePEc:wbk:wbrwps:412

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    Keywords: Economic Stabilization; Macroeconomic Management; Economic Theory&Research; Environmental Economics&Policies; Fiscal&Monetary Policy;


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    Cited by:
    1. Prema-chandra Athukorala & Sarath Rajapatirana, 1991. "The Domestic Financial Market and the Trade Liberalization Outcome: The Evidence from Sri Lanka," Research Papers, School of Economics, La Trobe University 1991.01, School of Economics, La Trobe University.
    2. Eugenio Diaz Bonilla & Hector E. Schamis, 1999. "La economía política de las políticas de cambio en Argentina," Research Department Publications, Inter-American Development Bank, Research Department 3079, Inter-American Development Bank, Research Department.
    3. Devarajan, Shantayanan & Rodrik, Dani, 1991. "Do the benefits of fixed exchange rates outweigh their costs? The Franc Zone in Africa," Policy Research Working Paper Series 777, The World Bank.
    4. Eugenio Diaz Bonilla & Hector E. Schamis, 1999. "The Political Economy of Exchange Rate Policies in Argentina," Research Department Publications, Inter-American Development Bank, Research Department 3078, Inter-American Development Bank, Research Department.


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