{
  "title": "External Stability Under Alternative Nominal Exchange Rate Anchors: An Application to the GCC Countries",
  "publication": "IMF Working Papers, January 1, 1997",
  "sourceUrl": "https://www.imf.org/en/publications/wp/issues/2016/12/30/external-stability-under-alternative-nominal-exchange-rate-anchors-an-application-to-the-gcc-2060",
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  "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.",
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    {
      "heading": "Summary",
      "content": "- Import and export stability is examined under two alternative nominal exchange rate anchors, the U.S. dollar and the SDR.\n- Stability under the two pegs depends critically on import and export elasticity with respect to exchange rates.\n- The implications of import and export elasticity for an optimal currency basket are also explored.\n- The elasticity estimates for the GCC countries suggest that the SDR peg may not outperform the dollar peg in improving external stability.\n- Nevertheless, switching to some other nominal exchange rate anchor may improve external stability, a possibility that remains to be explored."
    },
    {
      "heading": "Key findings on elasticities and external stability",
      "content": "- Stability under dollar and SDR pegs is driven by import and export elasticity with respect to exchange rates.\n- Elasticity estimates for the GCC countries indicate the SDR peg may not outperform the dollar peg in improving external stability.\n- The analysis implies that import and export elasticity magnitudes and signs are central to assessing the performance of nominal exchange rate anchors."
    },
    {
      "heading": "Implications for an optimal currency basket",
      "content": "- The paper explores how import and export elasticity inform the construction of an optimal currency basket.\n- Results for the GCC countries suggest that the SDR is not necessarily a superior anchor to the dollar for external stability.\n- The possibility remains that an alternative nominal exchange rate anchor (other than the dollar or SDR) could improve external stability; this avenue is identified for further exploration."
    },
    {
      "heading": "Policy-relevant considerations",
      "content": "- Choice of nominal exchange rate anchor should account for country-specific import and export elasticities.\n- Policymakers in the GCC region need to weigh the relative stability implications of a dollar peg versus an SDR peg given estimated elasticities.\n- Further analysis is necessary to identify whether other nominal anchors or baskets could yield better external stability outcomes.\n\n---\n\n Content in this bundle\n\n- wp9708\n  - wp9708 (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - wp9708 (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\nSource: https://www.imf.org/en/publications/wp/issues/2016/12/30/external-stability-under-alternative-nominal-exchange-rate-anchors-an-application-to-the-gcc-2060"
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    "Authors: Zubair Iqbal, S. Nuri Erbas",
    "Published: January 1, 1997",
    "Series: IMF Working Papers",
    "DOI: https://doi.org/10.5089/9781451927900.001",
    "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.",
    "Stability under dollar and SDR pegs is driven by import and export elasticity with respect to exchange rates.",
    "Elasticity estimates for the GCC countries indicate the SDR peg may not outperform the dollar peg in improving external stability.",
    "The analysis implies that import and export elasticity magnitudes and signs are central to assessing the performance of nominal exchange rate anchors.",
    "The paper explores how import and export elasticity inform the construction of an optimal currency basket.",
    "Results for the GCC countries suggest that the SDR is not necessarily a superior anchor to the dollar for external stability.",
    "The possibility remains that an alternative nominal exchange rate anchor (other than the dollar or SDR) could improve external stability; this avenue is identified for further exploration.",
    "Choice of nominal exchange rate anchor should account for country-specific import and export elasticities.",
    "Policymakers in the GCC region need to weigh the relative stability implications of a dollar peg versus an SDR peg given estimated elasticities.",
    "Further analysis is necessary to identify whether other nominal anchors or baskets could yield better external stability outcomes.",
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