Sustaining Fixed Exchange Rates: A Model with Debt and Institutions

Author/Editor:

Alexander Pitt

Publication Date:

March 1, 2001

Electronic Access:

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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.

Series:

Working Paper No. 2001/027

Subject:

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

English

Publication Date:

March 1, 2001

ISBN/ISSN:

9781451844528/1018-5941

Stock No:

WPIEA0272001

Pages:

23

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