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Nominal Anchor Exchange Rate Policies as a Domestic Distortion

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  • Anne O. Krueger

Abstract

This paper analyzes a nominal anchor exchange rate policy as a domestic distortion, in the tradition of international trade theory. It is shown that, in addition to the problems of sustainability and exit pinpointed in the exchange rate literature, a nominal anchor exchange rate policy, while in force, drives a wedge between the domestic and the international intertemporal marginal rates of substitution. The welfare cost of the Mexican use of the nominal anchor exchange rate policy prior to December 1994 is then estimated.

Suggested Citation

  • Anne O. Krueger, 1997. "Nominal Anchor Exchange Rate Policies as a Domestic Distortion," NBER Working Papers 5968, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:5968
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    References listed on IDEAS

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    Cited by:

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    2. Rolando H. Castañeda, 2003. "The Cuban External Sector in 1989-2002: Some Observations on Achievements, Failures and Challenges," Annual Proceedings, The Association for the Study of the Cuban Economy, vol. 13.
    3. Kolozsi Pal Peter, 2011. "Trade liberalization and exchange rate policy : possibilities and constraints in a small open economy : the case of Hungary [Libéralisation commerciale et politique de change : possibilités et contraintes dans une petite économie ouverte : le cas ," Sciences Po Economics Publications (main) tel-04052596, HAL.
    4. Drabek, Zdenek & Brada, Josef C., 1998. "Exchange Rate Regimes and the Stability of Trade Policy in Transition Economies," Journal of Comparative Economics, Elsevier, vol. 26(4), pages 642-668, December.
    5. Robertson, Raymond, 2003. "Exchange rates and relative wages: evidence from Mexico," The North American Journal of Economics and Finance, Elsevier, vol. 14(1), pages 25-48, March.
    6. repec:spo:wpmain:info:hdl:2441/53r60a8s3kup1vc9je5hhe4q4 is not listed on IDEAS
    7. John Anyanwu & Andrew E. O. Erhijakpor, 2007. "Working Paper 91 - Health Expenditures and Health Outcomes in Africa," Working Paper Series 226, African Development Bank.
    8. Sanjaya Acharya, 2014. "Trade liberalisation in fixed and flexible exchange rate regimes: a CGE analysis for Nepal," Journal of Economic Policy Reform, Taylor & Francis Journals, vol. 17(2), pages 129-148, June.
    9. repec:ilo:ilowps:478371 is not listed on IDEAS
    10. Islam, Iyanatul, & Ahmed, Ishraq. & Roy, Rathin. & Ramos, Raquel., 2012. "Macroeconomic policy advice and the Article IV consultations a development perspective," ILO Working Papers 994783713402676, International Labour Organization.
    11. repec:spo:wpmain:info:hdl:2441/f4rshpf3v1umfa09lass405k8 is not listed on IDEAS
    12. repec:spo:wpecon:info:hdl:2441/53r60a8s3kup1vc9je5hhe4q4 is not listed on IDEAS
    13. Debapriya Bhattacharya & Shouro Dasgupta & Dwitiya Jawher Neethi, 2012. "Assessing the Impact of the Global Economic and Financial Crisis on Bangladesh: An Intervention Analysis," CPD Working Paper 97, Centre for Policy Dialogue (CPD).
    14. Ronald I. McKinnon, 2002. "Limiting Moral Hazard and Reducing Risk in International Capital Flows: The Choice of an Exchange Rate Regime," The ANNALS of the American Academy of Political and Social Science, , vol. 579(1), pages 200-218, January.

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