Journal ArticleDOI
Fear of Floating
TLDR
This article analyzed the behavior of exchange rates, reserves, monetary aggregates, interest rates, and commodity prices across 154 exchange rate arrangements to assess whether official labels' provide an adequate representation of actual country practice.Abstract:
In recent years, many countries have suffered severe financial crises, producing a staggering toll on their economies, particularly in emerging markets. One view blames fixed exchange rates-- soft pegs'--for these meltdowns. Adherents to that view advise countries to allow their currency to float. We analyze the behavior of exchange rates, reserves, the monetary aggregates, interest rates, and commodity prices across 154 exchange rate arrangements to assess whether official labels' provide an adequate representation of actual country practice. We find that, countries that say they allow their exchange rate to float mostly do not--there seems to be an epidemic case of fear of floating.' Since countries that are classified as having a free or a managed float mostly resemble noncredible pegs--the so-called demise of fixed exchange rates' is a myth--the fear of floating is pervasive, even among some of the developed countries. We present an analytical framework that helps to understand why there is fear of floating.read more
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Fear of Floating
TL;DR: The authors analyzed the behavior of exchange rates, reserves, monetary aggregates, interest rates, and commodity prices across 154 exchange rate arrangements to assess whether official labels provide an adequate representation of actual country practice.
Book
Effects of Financial Globalization on Developing Countries: Some Empirical Evidence
TL;DR: The recent wave of financial globalization since the mid-1980s has been marked by a surge in capital flows among industrial countries and, more notably, between industrial and developing countries as discussed by the authors.
Journal ArticleDOI
Distinguished Lecture on Economics in Government Exchange Rate Regimes: Is the Bipolar View Correct?
TL;DR: The choice of appropriate exchange rate regime for economies with access to international capital markets increasingly means a move away from the middle ground of pegged but adjustable fixed exchange rates towards the two corner regimes of either flexible exchange rates or a fixed exchange rate supported, if necessary, by a commitment to give up altogether an independent monetary policy as discussed by the authors.
Journal ArticleDOI
The Effect of Fixed Exchange Rates on Monetary Policy
TL;DR: In this article, the authors classify countries as pegged or non-pegged and examine whether a pegged country must follow the interest rate changes in the base country more than nonpegs.
ReportDOI
The Natural Resource Curse: A Survey
TL;DR: The authors consider seven aspects of commodity wealth, each of interest in its own right, but each also a channel that some have suggested could lead to sub-standard economic performance: long-term trends in world commodity prices, volatility, permanent crowding out of manufacturing, poor institutions, unsustainability, war, and cyclical Dutch Disease.
References
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Staggered prices in a utility-maximizing framework
TL;DR: In this article, the authors developed a model of staggered prices along the lines of Phelps (1978) and Taylor (1979, 1980), but utilizing an analytically more tractable price-setting technology.
A Theory of Optimum Currency Areas
TL;DR: A theory of optimum currency areas is proposed in this paper, where the authors argue that periodic balance-of-payments crises will remain an integral feature of the international economic system as long as fixed exchange rates and rigid wage and price levels prevent the terms of trade from fulfilling a natural role in the adjustment process.
Journal ArticleDOI
The Optimal Degree of Commitment to an Intermediate Monetary Target
TL;DR: In this article, it is shown that the ideal central bank should place a large, but finite, weight on inflation, and a new framework for choosing among alternative intermediate monetary targets is proposed.
Posted Content
Rules, Discretion and Reputation in a Model of Monetary Policy
TL;DR: In this article, the authors develop an example of a reputational equilibrium where the out-comes turn out to be weighted averages of those from discretion and those from the ideal rule.
Journal ArticleDOI
"Rational" Expectations, the Optimal Monetary Instrument, and the Optimal Money Supply Rule
Thomas J. Sargent,Neil Wallace +1 more
TL;DR: In this paper, alternative monetary policies are analyzed in an ad hoc macroeconomic model in which the public's expectations about prices are rational, and it turns out that the probility distribution of output is independent of the particular deterministic money supply rule in effect.