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Which Currency Exchange Regime for Emerging Markets? Corner Solutions under Question

  • Jean-Pierre Allegret

    ()

    (GATE, University of Lyon, CNRS, ENS-LSH, France)

During the 90s, recurrent exchange rate crises in emerging markets have shown the extreme fragility of soft pegs, the so-called intermediate exchange rate regimes. As a result, numerous academic economists but also International institutions have promoted a new consensus: domestic authorities have to choose their exchange rate regime between only two solutions called corner solutions or extreme regimes: hard pegs or independent floating. This paper questions de relevance of this consensus. We stress the main advantages and costs of each corner solution. We conclude by stressing that intermediate regimes associated to an inflation targeting framework seem a better solution for emerging countries than corner solutions.

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File URL: http://www.panoeconomicus.rs/casopis/osmibroj/which%20currency%20exchange%20regime%20for%20emerging%20markets.pdf
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Article provided by Savez ekonomista Vojvodine, Novi Sad, Serbia in its journal Panoeconomicus.

Volume (Year): 54 (2007)
Issue (Month): 4 (December)
Pages: 397-427

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Handle: RePEc:voj:journl:v:54:y:2007:i:4:p:397-427
Contact details of provider: Web page: http://www.panoeconomicus.rs/

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  1. Jeffrey A. Frankel & Sergio L. Schmukler & Luis Serven, 2002. "Global Transmission of Interest Rates: Monetary Independence and Currency Regime," NBER Working Papers 8828, National Bureau of Economic Research, Inc.
  2. Reinhart, Carmen & Calvo, Guillermo, 2002. "Fear of floating," MPRA Paper 14000, University Library of Munich, Germany.
  3. Carmen M. Reinhart & Vincent R. Reinhart, 2001. "What Hurts Most? G-3 Exchange Rate or Interest Rate Volatility," NBER Working Papers 8535, National Bureau of Economic Research, Inc.
  4. Reinhart, Carmen & Calvo, Guillermo, 2001. "Fixing for your life," MPRA Paper 13873, University Library of Munich, Germany.
  5. Svensson, L.E.O., 1998. "Open-Economy Inflation Targeting," Papers 638, Stockholm - International Economic Studies.
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