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To Peg or Not to Peg; A Template for Assessing the Nobler


  • Aasim M. Husain


This paper proposes a template for assessing whether or not a country's economic and financial characteristics make it an appropriate candidate for a pegged exchange rate regime. The template employs quantifiable measures of attributes-trade orientation, financial integration, economic diversification, macroeconomic stabilization, credibility, and "fear-offloating" type effects-that have been identified in the literature as key potential determinants of regime choice. To illustrate, the template is applied to Kazakhstan and Pakistan. The results indicate a fairly strong case against a pegged regime in Pakistan. The implications for Kazakhstan are mixed, although changes in that economy in recent years strengthen the case against a peg.

Suggested Citation

  • Aasim M. Husain, 2006. "To Peg or Not to Peg; A Template for Assessing the Nobler," IMF Working Papers 06/54, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:06/54

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    References listed on IDEAS

    1. Frankel, Jeffrey, 2003. "A Proposed Monetary Regime for Small Commodity Exporters: Peg the Export Price ('PEP')," International Finance, Wiley Blackwell, vol. 6(1), pages 61-88, Spring.
    2. Guillermo A. Calvo & Carmen M. Reinhart, 2002. "Fear of Floating," The Quarterly Journal of Economics, Oxford University Press, vol. 117(2), pages 379-408.
    3. Carmen M. Reinhart & Kenneth S. Rogoff, 2004. "The Modern History of Exchange Rate Arrangements: A Reinterpretation," The Quarterly Journal of Economics, Oxford University Press, vol. 119(1), pages 1-48.
    4. Andrew K. Rose, 2000. "One money, one market: the effect of common currencies on trade," Economic Policy, CEPR;CES;MSH, vol. 15(30), pages 7-46, April.
    5. Sebastian Edwards, 1999. "The Choice of Exchange Rate Regime in Developing and Middle Income Countries," NBER Chapters,in: Changes in Exchange Rates in Rapidly Developing Countries: Theory, Practice, and Policy Issues (NBER-EASE volume 7), pages 9-28 National Bureau of Economic Research, Inc.
    6. Aasim M. Husain & Ashoka Mody & Nienke Oomes & Robin Brooks & Kenneth Rogoff, 2003. "Evolution and Performance of Exchange Rate Regimes," IMF Working Papers 03/243, International Monetary Fund.
    7. Aasim M. Husain, 2006. "Choosing the Right Exchange Rate Regime for Pakistan," SBP Research Bulletin, State Bank of Pakistan, Research Department, vol. 2, pages 91-111.
    8. Paolo Mauro & Grace Juhn, 2002. "Long-Run Determinants of Exchange Rate Regimes; A Simple Sensitivity Analysis," IMF Working Papers 02/104, International Monetary Fund.
    9. Barry J. Eichengreen & Inci Ötker & A. Javier 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.
    10. repec:rus:hseeco:181565 is not listed on IDEAS
    11. Peter J Montiel & Bijan B. Aghevli & Mohsin S. Khan, 1991. "Exchange Rate Policy in Developing Countries; Some Analytical Issues," IMF Occasional Papers 78, International Monetary Fund.
    12. repec:hrv:faseco:34721963 is not listed on IDEAS
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    Cited by:

    1. Mark W Lewis & Aurelie Martin & Gabriel Di Bella, 2007. "Assessing Competitiveness and Real Exchange Rate Misalignment in Low-Income Countries," IMF Working Papers 07/201, International Monetary Fund.
    2. International Monetary Fund, 2006. "Belize; Selected Issues and Statistical Appendix," IMF Staff Country Reports 06/370, International Monetary Fund.
    3. Bonpasse, Morrison, 2006. "The Single Global Currency: Common Cents for the World," MPRA Paper 1175, University Library of Munich, Germany.
    4. Aasim M. Husain, 2006. "Choosing the Right Exchange Rate Regime for Pakistan," SBP Research Bulletin, State Bank of Pakistan, Research Department, vol. 2, pages 91-111.
    5. Bonpasse, Morrison, 2007. "The Single Global Currency - Common Cents for the World (2007 Edition)," MPRA Paper 5879, University Library of Munich, Germany.
    6. Bonpasse, Morrison, 2009. "The single global currency - common cents for the world (2008 Edition)," MPRA Paper 14756, University Library of Munich, Germany.


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