International Center for Economic Growth
نویسندگان
چکیده
There is an ongoing debate on the question of which exchange rate regime is better suited to guarantee stability: fixed or flexible rates? The macroeconomic crisis in Argentina has again stimulated the discussion. In this paper, we argue that it is misleading to solely concentrate on exchange rate policy to assess the preconditions for stability in an international surrounding. Instead, we show that the exchange rate regime and the institutional setting have to be compatible to increase the exchange rate regime’s credibility and to help with achieving stability. This hypothesis is empirically tested for Latin America countries. We cannot reject it. Dr. Andreas Freytag Associate Professor University of Cologne Robert-Koch-Str. 41, D-50931 Cologne Phone: ++49 221 470-4879, Fax: ++49 221 470-5187, e-mail: [email protected]. * Study carried out for the OECD Development Centre. Thanks are due to Ken Kuttner and Adam Posen for letting me share their data on exchange rate regimes, central bank autonomy and policy targets. I also acknowledge helpful comments on earlier versions by Jens Clausen, Bernd Hayo, Philipp Paulus, Helmut Reisen, Friedrich Sell, Ralph Setzer, Peter Tillmann as well as the participants of economic workshops at the Ruhr-University in Bochum, the University of Göttingen, the University of Tartu, BoFIT, the Austrian National Bank (OeNB) and the Annual Public Choice Society Meeting in San Diego, March 22-24, 2002.
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