To Peg or Not to Peg: A Template for Assessing the Nobler

Aasim Husain

No 2006/054, IMF Working Papers from International Monetary Fund

Abstract: This paper proposes a template for assessing whether or not a country's economic and financial characteristics make it an appropriate candidate for a pegged exchange rate regime. The template employs quantifiable measures of attributes-trade orientation, financial integration, economic diversification, macroeconomic stabilization, credibility, and "fear-offloating" type effects-that have been identified in the literature as key potential determinants of regime choice. To illustrate, the template is applied to Kazakhstan and Pakistan. The results indicate a fairly strong case against a pegged regime in Pakistan. The implications for Kazakhstan are mixed, although changes in that economy in recent years strengthen the case against a peg.

Keywords: WP; regime choice; demand shock; trade orientation; economic cycle (search for similar items in EconPapers)
Pages: 29
Date: 2006-02-01
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Citations: View citations in EconPapers (13)

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