III General Considerations Regarding the Choice of Exchange Rate Regimes
Author:
Mr. Peter J Montiel
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Bijan B. Aghevli https://isni.org/isni/0000000404811396 International Monetary Fund

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Mr. Mohsin S. Khan
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Language:
English
Print Publication Date:
15 May 1991
Keywords:
OP; nominal exchange rate; inflation rate; exchange rate; devaluation; balance of payments objective; exchange rate appreciation; exchange rate depreciation; exchange rate fixity; balance of payments constraint; Exchange rate flexibility; Exchange rates; Exchange rate arrangements; Conventional peg; Exchange rate adjustments

Abstract

There is by now a large and well-known body of theoretical literature on the relative merits of fixed and flexible exchange rate regimes. This section first describes the salient features of the literature, which has been developed mainly in the context of industrial countries engaged in short-run stabilization of output,4 but which may also be relevant for developing countries not restricted by a severe balance of payments constraint. The discussion focuses on the effectiveness of fixed and flexible exchange rates in insulating the economy from external and domestic shocks. The section concludes with an assessment of the practical implications of this literature for adopting fixed or flexible exchange rates in cases in which the objective is to stabilize output in a low and stable inflation environment.

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Cover Exchange Rate Policy in Developing Countries
Exchange Rate Policy in Developing Countries
Some Analytical Issues
ISBN:
9781557752093
ISSN:
0251-6365
Publication Date:
15 May 1991
Publisher:
International Monetary Fund
DOI:
https://doi.org/10.5089/9781557752093.084
Pages:
30

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