Exchange-Rate-Based Stabilization: A Critical Look at the Stylized Facts

Author/Editor:

A. J Hamann

Publication Date:

October 1, 1999

Electronic Access:

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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:

Do exchange-rate-based stabilizations generate distinctive economic dynamics? To address this question, this paper identifies stabilization episodes using criteria that differ from those in previous empirical studies of exchange-rate-based stabilizations. We find that, while some differences can be detected between exchange-rate-based stabilizations and stabilizations where the exchange rate is not the anchor, the behavior of important variables does not appear to differ—especially output growth, which is good in both cases. There is also no evidence that fiscal discipline is enhanced by adopting an exchange-rate anchor, or that there are any systematic differences in the success records of stabilizations that use the exchange rate as a nominal anchor and those that do not.

Series:

Working Paper No. 1999/132

Subject:

Balance of payments Current account balance Exchange rate anchor Exchange rates Foreign exchange Inflation Monetary policy Prices Real exchange rates

English

Publication Date:

October 1, 1999

ISBN/ISSN:

9781451855364/1018-5941

Stock No:

WPIEA1321999

Pages:

28

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