 The Dangers of Exchange‐Rate Pegging in Emerging‐Market CountriesInternational Finance, 1998, vol. 1, issue 1, 81-101 Abstract: This paper examines the question of whether pegging exchange rates is a good strategy for emerging‐market countries. Although pegging the exchange rate provides a nominal anchor for emerging‐market countries that can help them to control inflation, the analysis in this paper does not provide support for this strategy for the conduct of monetary policy. First there are the usual criticisms of exchange‐rate pegging, that it entails the loss of an independent monetary policy, exposes the country to the transmission of shocks from the anchor country, increases the likelihood of speculative attacks and potentially weakens the accountability of policymakers to pursue anti‐inflationary policies. However, most damaging to the case for exchange‐rate pegging in emerging‐market countries is that it can increase financial fragility and heighten the potential for financial crises. Because of the devastating effects on the economy that financial crises can bring, an exchange‐rate peg is a very dangerous strategy for controlling inflation in emerging‐market countries. Instead, this paper suggests that a strategy with a greater likelihood of success involves the granting of independence to the central bank and the adoption of inflation targeting. Date: 1998 Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:bla:intfin:v:1:y:1998:i:1:p:81-101 Ordering information: This journal article can be ordered from Access Statistics for this article International Finance is currently edited by Benn Steil More articles in International Finance from Wiley Blackwell |
Is your work missing from RePEc? Here is how to contribute.
Questions or problems? Check the EconPapers FAQ or send mail to .
EconPapers is hosted by the
School of Business at Örebro University.