frankel - NBER WORKING PAPER SERIES NO SINGLE CURRENCY...

Info iconThis preview shows pages 1–4. Sign up to view the full content.

View Full Document Right Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: NBER WORKING PAPER SERIES NO SINGLE CURRENCY REGIME IS RIGHT FOR ALL COUNTRIES OR AT ALL TIMES Jeffrey A. Frankel Working Paper 7338 http://www.nber.org/papers/w7338 NATIONAL BUREAU OF ECONOMIC RESEARCH 1050 Massachusetts Avenue Cambridge, MA 02138 September 1999 The author would like to thank for comments Barry Eichengreen, Peter Kenen, David Lipton, Larry Summers, and seminar participants at Brookings, Princeton, MIT, Stanford, the University of Michigan, Fletcher School, Federal Reserve Bank of New York, International Monetary Fund and Council on Foreign Relations; and to thank Ron Alquist for research assistance. The views expressed herein are those of the authors and not necessarily those of the National Bureau of Economic Research. 1999 by Jeffrey A. Frankel. All rights reserved. Short sections of text, not to exceed two paragraphs, may be quoted without explicit permission provided that full credit, including notice, is given to the source. No Single Currency Regime is Right for All Countries or at All Times Jeffrey A. Frankel NBER Working Paper No. 7338 September 1999 JEL No. F3 ABSTRACT This essay considers some prescriptions that are currently popular regarding exchange rate regimes: a general movement toward floating, a general movement toward fixing, or a general movement toward either extreme and away from the middle. The whole spectrum from fixed to floating is covered (including basket pegs, crawling pegs, and bands), with special attention to currency boards and dollarization. One overall theme is that the appropriate exchange rate regime varies depending on the specific circumstances of the country in question (which includes the classic optimum currency area criteria, as well as some newer criteria related to credibility) and depending on the circumstances of the time period in question (which includes the problem of successful exit strategies). Latin American interest rates are seen to be more sensitive to US interest rates when the country has a loose dollar peg than when it has a tight peg. It is also argued that such relevant country characteristics as income correlations and openness can vary over time, and that the optimum currency area criterion is accordingly endogenous. Jeffrey A. Frankel Kennedy School of Government Harvard University 79 JFK St. Cambridge MA 02138 and NBER jeffrey_frankel@harvard.edu No Single Currency Regime is Right for all Countries or at All Times Jeffrey A. Frankel CONTENTS 1. Balancing the Advantages of Fixed vs. Flexible Exchange Rates The Flexibility-continuum of Exchange Rate Regimes The Hypothesis of the Vanishing Intermediate Regime Reminder of the Advantages of Fixed vs. Floating 2. No Single Regime is Right for All Countries: The Optimum Currency Area Definition of Optimum Currency Area The Integration Parameters of the OCA Criteria 3. Corner Solutions Are Right for Some Countries Currency Boards The Alternative of Dollarization The Argentine Dollarization Proposal: Is it a Good Idea?The Argentine Dollarization Proposal: Is it a Good Idea?...
View Full Document

Page1 / 49

frankel - NBER WORKING PAPER SERIES NO SINGLE CURRENCY...

This preview shows document pages 1 - 4. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online