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Exchange Rate Regimes, Capital Flows and Crisis Prevention

  • Sebastian Edwards

In this paper I analyze, within the context of the new 'financial architecture,' the relationship between exchange rate regimes, capital flows and currency crises in emerging economies. The paper draws on lessons learned during the 1990s, and deals with some of the most important policy controversies that emerged after the Mexican, East Asian, Russian and Brazilian crises. I evaluate some recent proposals for reforming the international financial architecture that have emphasized exchange rate regimes and capital mobility. I discuss emerging markets' ability to have floating exchange rate regime, and I analyze issues related to 'dollarization.'

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 8529.

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Date of creation: Oct 2001
Date of revision:
Publication status: published as Feldstein, Martin (ed.) Economic and financial crises in emerging market economies, NBER Conference Report series. Chicago and London: University of Chicago Press, 2003.
Handle: RePEc:nbr:nberwo:8529
Contact details of provider: Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
Phone: 617-868-3900
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  1. Menzie D. Chinn, 1998. "Before the Fall: Were East Asian Currencies Overvalued?," NBER Working Papers 6491, National Bureau of Economic Research, Inc.
  2. Jeffrey Frankel & Sergio Schmukler & Luis Serven, 2000. "Verifiability and the Vanishing Intermediate Exchange Rate Regime," NBER Working Papers 7901, National Bureau of Economic Research, Inc.
  3. Sebastian Edwards, 1988. "Structural Adjustment Policies in Highly Indebted Countries," NBER Working Papers 2502, National Bureau of Economic Research, Inc.
  4. Kevin Cowan & Jose De Gregorio, 1996. "Exchange rate policies and capital account management: Chile in the 1990s," Proceedings, Federal Reserve Bank of San Francisco, pages 465-488.
  5. Reinhart, Carmen, 2000. "The mirage of floating exchange rates," MPRA Paper 13736, University Library of Munich, Germany.
  6. Svensson, L-E-O, 1997. "Inflation Targeting : Some Extensions," Papers 625, Stockholm - International Economic Studies.
  7. Hinkle, Lawrence E. & Monteil, Peter J. (ed.), 1999. "Exchange Rate Misalignment: Concepts and Measurement for Developing Countries," OUP Catalogue, Oxford University Press, number 9780195211269.
  8. Jose De Gregorio & Sebastian Edwards & Rodrigo O. Valdes, 2000. "Controls on Capital Inflows: Do they Work?," NBER Working Papers 7645, National Bureau of Economic Research, Inc.
  9. Eichengreen, B. & Masson, P. & Savastano, M. & Sharma, S., 1999. "Transition Strategies and Nominal Anchors on the Road to Greater Exchange-Rate Flexibility," Princeton Essays in International Economics 213, International Economics Section, Departement of Economics Princeton University,.
  10. Edwards, Sebastian, 1998. "Two Crises: Inflationary Inertia and Credibility," Economic Journal, Royal Economic Society, vol. 108(448), pages 680-702, May.
  11. Edwards, Sebastian, 2001. "Dollarization: Myths and realities," Journal of Policy Modeling, Elsevier, vol. 23(3), pages 249-265, April.
  12. Bernard Laurens & Jaime Cardoso, 1998. "Managing Capital Flows: Lessons From the Experience of Chile," IMF Working Papers 98/168, International Monetary Fund.
  13. Frenkel, Jacob A & Razin, Assaf, 1986. "Fiscal Policies in the World Economy," Journal of Political Economy, University of Chicago Press, vol. 94(3), pages 564-94, June.
  14. Eduardo Borensztein & Jose De Gregorio & Jong-Wha Lee, 1995. "How Does Foreign Direct Investment Affect Economic Growth?," NBER Working Papers 5057, National Bureau of Economic Research, Inc.
  15. Stanley Fischer, 2001. "Exchange Rate Regimes: Is the Bipolar View Correct?," Journal of Economic Perspectives, American Economic Association, vol. 15(2), pages 3-24, Spring.
  16. Andres Velasco & Roberto Chang, 2000. "Exchange-Rate Policy for Developing Countries," American Economic Review, American Economic Association, vol. 90(2), pages 71-75, May.
  17. Sebastian Edwards, 1998. "Capital Inflows into Latin America: A Stop-Go Story?," NBER Working Papers 6441, National Bureau of Economic Research, Inc.
  18. Miguel A. Kiguel & Nissan Liviatan, 1995. "Stopping Three Big Inflations: Argentina, Brazil, and Peru," NBER Chapters, in: Reform, Recovery, and Growth: Latin America and the Middle East, pages 369-414 National Bureau of Economic Research, Inc.
  19. Edwards, Sebastian (ed.), 2000. "Capital Flows and the Emerging Economies," National Bureau of Economic Research Books, University of Chicago Press, edition 1, number 9780226184708.
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