© 1991 International Monetary Fund Reprinted March 1995
Library of Congress Cataloging-in-Publication Data
Aghevli, Bijan B.
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Exchange rate policy in developing countries : some analytic issues / by Bijan B. Aghevli, Mohsin S. Khan, and Peter J. Montiel.
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p. cm. — (Occasional Paper / International Monetary Fund, ISSN 0251-6365; 81)
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“March 1991”
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Includes bibliographical references.
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ISBN 1-55775-209-5
1. Foreign exchange administration—Developing countries.
I. Khan, Mohsin S. II. Montiel, Peter J. III. Series: Occasional paper (International Monetary Fund); no. 78.
HG3877.A44 1991
91-14097
CIP
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Contents
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Preface
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I. Introduction
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II. Exchange Rate Arrangements and Policies in Developing Countries
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III. General Considerations Regarding the Choice of Exchange Rate Regimes
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Optimal Exchange Rate Regime
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Practical Policy Implications
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IV. Role of the Exchange Rate in External Adjustment
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Determination of the Equilibrium Exchange Rate
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Exchange Rate Rules, External Competitiveness, and Inflation
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V. Exchange Rate Regimes and Financial Discipline
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Financial Constraints Imposed by a Fixed Exchange Rate
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Implications of an Announced Fixed Exchange Rate for Financial Stability
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Achievement of Credibility
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The Choice of Anchor for Financial Stability
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Exchange Rate Adjustment Versus Fiscal Contraction
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VI. Summary and Conclusions
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References
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Tables
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1. Developing Countries: Exchange Rate Arrangements, 1976-89
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2. Trend Movements of Relative Prices, Nominal Effective Exchange Rate, and Real Effective Exchange Rate for Groups According to their Exchange Rate Arrangement, 1982-89
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Preface
This study was prepared in the Research Department of the International Monetary Fund. Its authors are Bijan B. Aghevli, Senior Advisor; Mohsin S. Khan, Assistant Director; and Peter J. Montiel, Assistant Division Chief.
The study benefited greatly from suggestions from Fund colleagues who are too numerous to be all identified, but special mention should be made of Saul Lizondo, Delano Villanueva, and Peter Wickham, who provided substantial input into the study, as well as Guillermo Calvo, Morris Goldstein, and Jacques J. Polak for valuable comments. The paper was edited by David Driscoll of the External Relations Department. The authors alone are responsible for this study; the opinions expressed are theirs and do not necessarily reflect the views of the Fund.