To Peg or Not To Peg? A Simple Model of Exchange Rate Regime Choice In Small Economies

Helge Berger (), Henrik Jensen () and Guttorm Schjelderup ()

No CESifo Working Paper No. 468, CESifo Working Paper Series from CESifo Group Munich

Abstract: The choice of an exchange rate peg often points to a trade-off between gaining credibility and losing flexibility. We show that the flexibility loss may be reduced if domestic and foreign shocks are coorelated and more volatile. Allowing for a plausible structural change after a peg, a flexibility gain may result.

Keywords: Exchange rate regime choice; credibility versus flexibility; international spill-overs; imported stabilization (search for similar items in EconPapers)
JEL-codes: E52 F41 (search for similar items in EconPapers)
Date: 2001
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Journal Article: To peg or not to peg?: A simple model of exchange rate regime choice in small economies (2001)
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