Exchange Rate Policy Options for Post-Crisis Southeast Asia: Is There a Case for Currency Baskets?
27 Pages Posted: 8 Feb 2003
Following the recent financial crises in Southeast Asia and elsewhere, the perennial issue of the exchange rate policy options for small and open developing countries has resurfaced. There seems to be an emerging consensus that the frequency with which 'soft pegs' have been susceptible to speculative attacks in this era of escalating global capital flows has increased pressure for developing countries to adopt 'corner' exchange rate regimes. This paper takes issue with this popular 'one-size-fits-all' prescription of exchange rate arrangements for developing countries and explores exchange rate policy options for post-crisis Southeast Asia. The principal purpose of this paper is to discuss the case for currency baskets as a general regime in its own right for Southeast Asia as opposed to being a compromise between the two corner solutions.
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