To Peg or Not to Peg: A Template for Assessing the Nobler

29 Pages Posted: 23 Mar 2006

See all articles by Aasim Husain

Aasim Husain

International Monetary Fund (IMF) - Research Department

Date Written: February 2006

Abstract

This paper proposes a template for assessing whether or not a country's economic and financial characteristics make it an appropriate candidate for a pegged exchange rate regime. The template employs quantifiable measures of attributes - trade orientation, financial integration, economic diversification, macroeconomic stabilization, credibility, and "fear-of-floating" type effects - that have been identified in the literature as key potential determinants of regime choice. To illustrate, the template is applied to Kazakhstan and Pakistan. The results indicate a fairly strong case against a pegged regime in Pakistan. The implications for Kazakhstan are mixed, although changes in that economy in recent years strengthen the case against a peg.

Keywords: Exchange rate regimes, regime choice, Kazakhstan, Pakistan

JEL Classification: F33, F31, F4, E52

Suggested Citation

Husain, Aasim, To Peg or Not to Peg: A Template for Assessing the Nobler (February 2006). IMF Working Paper No. 06/54, Available at SSRN: https://ssrn.com/abstract=892945

Aasim Husain (Contact Author)

International Monetary Fund (IMF) - Research Department ( email )

700 19th Street NW
Washington, DC 20431
United States

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