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Exchange Rate Regimes of Developing Countries: Global Context and Individual Choices

In: Macroeconomic Modelling and Monetary and Exchange Rate Regimes

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  • Esteban Jadresic
  • Paul R. Masson
  • Paolo Mauro

Abstract

This paper argues that, in analyzing the choice of exchange rate regimes in developing and transition countries in the present global economic context, it is essential to distinguish between those countries with substantial involvement in international financial markets and those where involvement is limited. For developing countries with important linkages to modern global capital markets, an important lesson of the recent crises in emerging market countries is that the requirements for sustaining pegged exchange rate regimes have become significantly more demanding. For many emerging market countries, therefore, regimes that allow substantial actual exchange rate flexibility are probably desirable. If supported by the requisite policy discipline and institutional structures, however, hard currency pegs may also be appropriate for some of these countries. Beyond the emerging markets countries, for many developing countries with less linkage to global capital markets, traditional exchange rate pegs and intermediate regimes are more viable and retain important advantages.

Suggested Citation

  • Esteban Jadresic & Paul R. Masson & Paolo Mauro, 2019. "Exchange Rate Regimes of Developing Countries: Global Context and Individual Choices," World Scientific Book Chapters, in: Macroeconomic Modelling and Monetary and Exchange Rate Regimes, chapter 5, pages 143-193, World Scientific Publishing Co. Pte. Ltd..
  • Handle: RePEc:wsi:wschap:9789811201721_0005
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    References listed on IDEAS

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    1. Isard,Peter, 1995. "Exchange Rate Economics," Cambridge Books, Cambridge University Press, number 9780521466004.
    2. Ricardo Hausmann & Michael Gavin & Carmen Pagés-Serra & Ernesto H. Stein, 1999. "Financial Turmoil and Choice of Exchange Rate Regime," Research Department Publications 4170, Inter-American Development Bank, Research Department.
    3. Masson, Paul R., 2001. "Exchange rate regime transitions," Journal of Development Economics, Elsevier, vol. 64(2), pages 571-586, April.
    4. Paul R. Masson & Miguel A. Savastano & Sunil Sharma, 2019. "The Scope for Inflation Targeting in Developing Countries," World Scientific Book Chapters, in: Macroeconomic Modelling and Monetary and Exchange Rate Regimes, chapter 10, pages 331-383, World Scientific Publishing Co. Pte. Ltd..
    5. Jonathan David Ostry & Anne Marie Gulde & Atish R. Ghosh & Holger C. Wolf, 1995. "Does the Nominal Exchange Rate Regime Matter?," IMF Working Papers 95/121, International Monetary Fund.
    6. Jeffrey A. Frankel, 1999. "No Single Currency Regime is Right for All Countries or At All Times," NBER Working Papers 7338, National Bureau of Economic Research, Inc.
    7. Maurice Obstfeld, 1995. "Intenational Currency Experience: New Lessons and Lessons Relearned," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 26(1, 25th A), pages 119-220.
    8. Calvo, Guillermo A. & Vegh, Carlos A., 1999. "Inflation stabilization and bop crises in developing countries," Handbook of Macroeconomics, in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 24, pages 1531-1614, Elsevier.
    9. Sebastian Edwards & Miguel A. Savastano, 1999. "Exchange Rates in Emerging Economies: What Do We Know? What Do We Need to Know?," NBER Working Papers 7228, National Bureau of Economic Research, Inc.
    10. Ricardo Hausmann & Michael Gavin & Carmen Pagés & Ernesto H. Stein, 1999. "Financial Turmoil and the Choice of Exchange Rate Regime," IDB Publications (Working Papers) 4128, Inter-American Development Bank.
    11. Barry J. Eichengreen & Inci Ötker & A. J Hamann & Esteban Jadresic & R. B. Johnston & Hugh Bredenkamp & Paul R Masson, 1998. "Exit Strategies; Policy Options for Countries Seeking Exchange Rate Flexibility," IMF Occasional Papers 168, International Monetary Fund.
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    13. Maurice Obstfeld & Kenneth Rogoff, 1995. "The Mirage of Fixed Exchange Rates," Journal of Economic Perspectives, American Economic Association, vol. 9(4), pages 73-96, Fall.
    14. Paul R Masson, 1999. "Monetary and Exchange Rate Policy of Transition Economies of Central and Eastern Europe after the Launch of EMU," IMF Policy Discussion Papers 99/5, International Monetary Fund.
    15. Isard,Peter, 1995. "Exchange Rate Economics," Cambridge Books, Cambridge University Press, number 9780521460477.
    16. Carlo Cottarelli & Curzio Giannini, 1997. "Credibility Without Rules," IMF Occasional Papers 154, International Monetary Fund.
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    Cited by:

    1. Bofinger, Peter & Wollmershäuser, Timo, 2000. "Options for the exchange rate policies in the EU accession countries (and other emerging market economies)," W.E.P. - Würzburg Economic Papers 13, University of Würzburg, Chair for Monetary Policy and International Economics.
    2. Berg, Andrew & Borensztein, Eduardo & Mauro, Paolo, 2002. "An evaluation of monetary regime options for Latin America," The North American Journal of Economics and Finance, Elsevier, vol. 13(3), pages 213-235, December.
    3. Bayoumi, Tamim & Eichengreen, Barry & Mauro, Paolo, 2000. "On Regional Monetary Arrangements for ASEAN," Journal of the Japanese and International Economies, Elsevier, vol. 14(2), pages 121-148, June.

    More about this item

    Keywords

    Exchange Rates; Modelling; Monetary Unions; Inflation Targeting;

    JEL classification:

    • F45 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Macroeconomic Issues of Monetary Unions

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