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Exchange Rate Regimes, Capital Flows and Crisis Prevention

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  • Sebastian Edwards

Abstract

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.'

Suggested Citation

  • Sebastian Edwards, 2001. "Exchange Rate Regimes, Capital Flows and Crisis Prevention," NBER Working Papers 8529, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:8529
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    References listed on IDEAS

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    1. Hinkle, Lawrence E. & Monteil, Peter J. (ed.), 1999. "Exchange Rate Misalignment: Concepts and Measurement for Developing Countries," OUP Catalogue, Oxford University Press, number 9780195211269.
    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. De Gregorio, Jose & Edwards, Sebastian & Valdes, Rodrigo O., 2000. "Controls on capital inflows: do they work?," Journal of Development Economics, Elsevier, vol. 63(1), pages 59-83, October.
    4. Chinn, Menzie D., 2000. "Before the fall: were East Asian currencies overvalued?," Emerging Markets Review, Elsevier, vol. 1(2), pages 101-126, September.
    5. Svensson, Lars E O, 1999. " Inflation Targeting: Some Extensions," Scandinavian Journal of Economics, Wiley Blackwell, vol. 101(3), pages 337-361, September.
    6. Carmen M. Reinhart, 2000. "Mirage of Floating Exchange Rates," American Economic Review, American Economic Association, vol. 90(2), pages 65-70, May.
    7. Edwards, Sebastian (ed.), 2000. "Capital Flows and the Emerging Economies," National Bureau of Economic Research Books, University of Chicago Press, edition 1, number 9780226184708.
    8. Edwards, Sebastian, 1998. "Two Crises: Inflationary Inertia and Credibility," Economic Journal, Royal Economic Society, vol. 108(448), pages 680-702, May.
    9. Frenkel, Jacob A & Razin, Assaf, 1986. "Fiscal Policies in the World Economy," Journal of Political Economy, University of Chicago Press, vol. 94(3), pages 564-594, June.
    10. Sebastian Edwards, 1989. "Structural Adjustment Policies in Highly Indebted Countries," NBER Chapters,in: Developing Country Debt and the World Economy, pages 249-262 National Bureau of Economic Research, Inc.
    11. Edwards, Sebastian, 2001. "Dollarization: Myths and realities," Journal of Policy Modeling, Elsevier, vol. 23(3), pages 249-265, April.
    12. 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.
    13. Borensztein, E. & De Gregorio, J. & Lee, J-W., 1998. "How does foreign direct investment affect economic growth?1," Journal of International Economics, Elsevier, vol. 45(1), pages 115-135, June.
    14. 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.
    15. Bernard J Laurens & Jaime Cardoso, 1998. "Managing Capital Flows; Lessons From the Experience of Chile," IMF Working Papers 98/168, International Monetary Fund.
    16. 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.
    17. Sebastian Edwards, 1998. "Capital Inflows into Latin America: A Stop-Go Story?," NBER Working Papers 6441, National Bureau of Economic Research, Inc.
    18. Andres Velasco & Roberto Chang, 2000. "Exchange-Rate Policy for Developing Countries," American Economic Review, American Economic Association, vol. 90(2), pages 71-75, May.
    19. 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,.
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    JEL classification:

    • F1 - International Economics - - Trade
    • F2 - International Economics - - International Factor Movements and International Business

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