Sustaining Fixed Exchange Rates: A Model with Debt and Institutions
23 Pages Posted: 30 Jan 2006
There are 2 versions of this paper
Sustaining Fixed Exchange Rates: A Model with Debt and Institutions
Sustaining Fixed Exchange Rates: A Model with Debt and Institutions
Date Written: March 2001
Abstract
Fixed exchange rate regimes have come into disrepute, as their defense has become all but impossible. Yet, while a determined attack on a currency cannot be prevented or, ultimately, withstood, policies can reduce the vulnerability of a country to such attacks.
The paper develops an analytical framework of costs and benefits of a fixed exchange rate, based on the ability of a developing country to meet its external obligations while achieving a maximum rate of long-term output growth. The focus is on how structural policies and institutions influence the degree of dependence of a country on a fixed exchange rate regime.
Keywords: Exchange rates, currency attacks, competition policy, financial supervision, productivity
JEL Classification: E42, N20, N23, O16
Suggested Citation: Suggested Citation
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