External Stability Under Alternative Nominal Exchange Rate Anchors: An Application to the GCC Countries

January 1, 1997

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Format: Chicago

Zubair Iqbal, and S. Nuri Erbas External Stability Under Alternative Nominal Exchange Rate Anchors: An Application to the GCC Countries, (USA: International Monetary Fund, 1997) accessed September 19, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

Import and export stability is examined under two alternative nominal exchange rate anchors, the U.S. dollar and the SDR. Stability under the two pegs depends critically on import and export elasticity with respect to exchange rates. The implications of import and export elasticity for an optimal currency basket are also explored. The elasticity estimates for the GCC countries suggest that the SDR peg may not outperform the dollar peg in improving external stability. Nevertheless, switching to some other nominal exchange rate anchor may improve external stability, a possibility that remains to be explored.

Subject: Currencies, Exchange rates, Exports, Foreign exchange, Imports, International trade, Money, Trade balance

Keywords: Currencies, Dollar peg, Dollar-denominated import, Exchange rates, Exports, Imports, SDR currency, SDR peg, SDR zone, Trade balance, WP

Publication Details

Pages:

36
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 1997/008
Stock No:

WPIEA0081997
ISBN:

9781451927900
ISSN:

1018-5941

Notes

This paper was presented at the Eleventh Annual Congress of the European Economic Association, Istanbul, August 21-24, 1996.

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