Sustaining Fixed Exchange Rates: A Model with Debt and Institutions

March 1, 2001

Preview Citation

Format: Chicago

Alexander Pitt. Sustaining Fixed Exchange Rates: A Model with Debt and Institutions, (USA: International Monetary Fund, 2001) accessed November 21, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

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.

Subject: Balance of payments, Conventional peg, Economic sectors, Exchange rates, Financial sector, Foreign direct investment, Foreign exchange, National accounts, Return on investment

Keywords: Abandonment cost, Asia and Pacific, Capital account, Competition policy, Conventional peg, Costs of abandoning, Currency attacks, Debt accumulation, Debt service, Debt structure, Debt-service cost, East Asia, Economic system, Economy move, Exchange rate target, Exchange rate volatility, Exchange rates, Financial sector, Financial supervision, Foreign direct investment, Interest rate cost, Monetary policy, Productivity, Return on investment, Risk premium, Volatility vis-à-vis currency, World interest rate, WP

Publication Details

Pages:

23
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2001/027
Stock No:

WPIEA0272001
ISBN:

9781451844528
ISSN:

1018-5941

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