Nominal Anchor Exchange Rate Policies as a Domestic Distortion

Anne O. Krueger

No 5968, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper analyzes a nominal anchor exchange rate policy as a domestic distortion, in the tradition of international trade theory. It is shown that, in addition to the problems of sustainability and exit pinpointed in the exchange rate literature, a nominal anchor exchange rate policy, while in force, drives a wedge between the domestic and the international intertemporal marginal rates of substitution. The welfare cost of the Mexican use of the nominal anchor exchange rate policy prior to December 1994 is then estimated.

Date: 1997-03
Note: IFM
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Citations: View citations in EconPapers (15)

Published as Development, Duality, and the International Economic Regime, Saxonhouse, Gary and T.N. Srinivasan, eds.: University of Michigan Press, January 1999.

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