Download Changes in Exchange Rates in Rapidly Developing Countries: by Takatoshi Ito, Anne O. Krueger PDF

By Takatoshi Ito, Anne O. Krueger

The alternate fee is a vital variable linking a nation's household economic system to the foreign industry. hence collection of an alternate cost regime is a valuable part within the financial coverage of constructing international locations and a key issue affecting financial growth.Historically, so much constructing international locations have hired strict trade expense controls and heavy defense of family industry-policies now regarded as at odds with sustainable and fascinating charges of monetary development. in contrast, many East Asian countries maintained trade fee regimes designed to accomplish an enticing weather for exports and an "outer-oriented" improvement technique. the end result has been swift and constant monetary progress over the last few decades.Changes in alternate charges in speedily constructing international locations explores the impression of such varied alternate keep an eye on regimes in either ancient and neighborhood contexts, focusing specific consciousness on East Asia. This complete, conscientiously researched quantity would certainly develop into a customary reference for students and policymakers.

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Extra info for Changes in Exchange Rates in Rapidly Developing Countries: Theory, Practice, and Policy Issues (National Bureau of Economic Research-East Asia Seminar on Economics)

Example text

These authors show how, in the presence of such intermediaries, small disturbances can provoke large-scale runs on a currency. , they provide 35 Contagious Currency Crises trade and informational effects, are at the center of the literature. To this point, however, theory has run ahead of empirics. The remainder of this paper makes a modest attempt to rectify this imbalance. 3 Data and Methodology We analyze a panel of quarterly macroeconomic and political data covering 20 industrial countries from 1959 through 1993 (a total of 2,800 observations).

In order to minimize this danger in the probit reported below, lagged values (for 1970-82) of these indexes were used. It is expected that the coefficients of these variables in the probit regressions will be negative, indicating that, as reflected in equation (lo), countries with more volatile external sectors will tend to select more flexible regimes. In principle, the actual importance of external shocks should also depend on the degree of openness of the economy-more open countries are more “vulnerable” to external disturbances.

In reality, most of the developing countries that have chosen fixed exchange rates have not altered their domestic monetary and fiscal policies sufficiently to insure against inflation-how else could we have the specter of Ghana in 1984 with a black market premium on the exchange rate of over 900 percent? Indeed, in most countries where nominal anchor exchange rate policies have been choAnne 0. Krueger is the Herald L. and Caroline L. E t c h Professor of Economics, senior fellow of the Hoover Institution, and director of the Center for Research on Economic Development and Policy Reform at Stanford University, and a research associate of the National Bureau of Economic Research.

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