Choosing the Right Exchange Rate Regime for Pakistan

Aasim M. Husain ()
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Aasim M. Husain: IMF, Washington, D.C.

SBP Research Bulletin, 2006, vol. 2, 91-111

Abstract: This paper uses a template proposed in Husain (2006) to assess whether or not Pakistan’s economic and financial characteristics make it an appropriate candidate for a pegged exchange rate regime. The template includes quantifiable measures of attributes—trade orientation, financial integration, economic diversification, macroeconomic stabilization, credibility, and “fear of floating” type effects—that have been identified in the literature as key potential determinants of regime choice. The results indicate a fairly strong case against a pegged regime in Pakistan, in marked contrast with the de facto pegged regime that has actually been in place for much of the period since the early 1990s.

Date: 2006
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