Exchange-Rate-Based Stabilization: A Critical Look at the Stylized Facts
October 1, 1999
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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.
Subject: Balance of payments, Current account balance, Exchange rate anchor, Exchange rates, Foreign exchange, Inflation, Monetary policy, Prices, Real exchange rates
Keywords: Africa, Current account balance, ERBS, ERBS literature, ERBS syndrome, exchange rate, Exchange rate anchor, Exchange rates, exchange-rate-based stabilization, Inflation, inflation stabilization, inflation stabilization strategy, Real exchange rates, stabilization episode, stabilization program, Sub-Saharan Africa, WP
Pages:
28
Volume:
1999
DOI:
Issue:
132
Series:
Working Paper No. 1999/132
Stock No:
WPIEA1321999
ISBN:
9781451855364
ISSN:
1018-5941
