Exchange Rate Volatility Under Peg: Do Trade Patterns Matter?
This paper assesses the role of trade patterns in shaping the volatility of the effective exchange rate under two alternative peg regimes: a hard peg to a single currency and a peg to a basket of currencies. I link the changes in the nominal effective exchange rate of a pegged currency to the fluctu...
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Format: | Elektronisch E-Book |
Sprache: | English |
Veröffentlicht: |
Washington, D.C
International Monetary Fund
2012
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Schriftenreihe: | IMF Working Papers
Working Paper No. 12/73 |
Online-Zugang: | UBW01 UEI01 LCO01 SBR01 UER01 SBG01 UBG01 FAN01 UBT01 FKE01 UBY01 UBA01 FLA01 UBM01 UPA01 UBR01 FHA01 FNU01 BSB01 TUM01 Volltext |
Zusammenfassung: | This paper assesses the role of trade patterns in shaping the volatility of the effective exchange rate under two alternative peg regimes: a hard peg to a single currency and a peg to a basket of currencies. I link the changes in the nominal effective exchange rate of a pegged currency to the fluctuations of its anchor vis-a-vis other major currencies, with an emphasis on the dynamics of trade patterns. In an application to the WAEMU (West African Economic and Monetary Union), I find that the nominal effective exchange rate of the union was twice as volatile under the hard peg to the euro as it would have been under a hypothetical basket peg over the past decade. This result was driven by the substantial shifts that occurred in WAEMU trade patterns, away from euro area countries and toward the ?""BICs"" (Brazil, India, and China). These findings suggest that policymakers should pay as much attention to the type of peg as to pegging in itself, with a particular focus on the dynamics of trade patterns |
Beschreibung: | 1 Online-Ressource (21 p) |
ISBN: | 1475502257 9781475502251 |
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index_date | 2024-07-03T20:13:17Z |
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record_format | marc |
series2 | IMF Working Papers |
spelling | Lonkeng Ngouana, Constant Verfasser aut Exchange Rate Volatility Under Peg Do Trade Patterns Matter? Lonkeng Ngouana, Constant Washington, D.C International Monetary Fund 2012 1 Online-Ressource (21 p) txt rdacontent c rdamedia cr rdacarrier IMF Working Papers Working Paper No. 12/73 This paper assesses the role of trade patterns in shaping the volatility of the effective exchange rate under two alternative peg regimes: a hard peg to a single currency and a peg to a basket of currencies. I link the changes in the nominal effective exchange rate of a pegged currency to the fluctuations of its anchor vis-a-vis other major currencies, with an emphasis on the dynamics of trade patterns. In an application to the WAEMU (West African Economic and Monetary Union), I find that the nominal effective exchange rate of the union was twice as volatile under the hard peg to the euro as it would have been under a hypothetical basket peg over the past decade. This result was driven by the substantial shifts that occurred in WAEMU trade patterns, away from euro area countries and toward the ?""BICs"" (Brazil, India, and China). These findings suggest that policymakers should pay as much attention to the type of peg as to pegging in itself, with a particular focus on the dynamics of trade patterns Online-Ausg http://elibrary.imf.org/view/IMF001/12680-9781475502251/12680-9781475502251/12680-9781475502251.xml Verlag URL des Erstveröffentlichers Volltext |
spellingShingle | Lonkeng Ngouana, Constant Exchange Rate Volatility Under Peg Do Trade Patterns Matter? |
title | Exchange Rate Volatility Under Peg Do Trade Patterns Matter? |
title_auth | Exchange Rate Volatility Under Peg Do Trade Patterns Matter? |
title_exact_search | Exchange Rate Volatility Under Peg Do Trade Patterns Matter? |
title_exact_search_txtP | Exchange Rate Volatility Under Peg Do Trade Patterns Matter? |
title_full | Exchange Rate Volatility Under Peg Do Trade Patterns Matter? Lonkeng Ngouana, Constant |
title_fullStr | Exchange Rate Volatility Under Peg Do Trade Patterns Matter? Lonkeng Ngouana, Constant |
title_full_unstemmed | Exchange Rate Volatility Under Peg Do Trade Patterns Matter? Lonkeng Ngouana, Constant |
title_short | Exchange Rate Volatility Under Peg |
title_sort | exchange rate volatility under peg do trade patterns matter |
title_sub | Do Trade Patterns Matter? |
url | http://elibrary.imf.org/view/IMF001/12680-9781475502251/12680-9781475502251/12680-9781475502251.xml |
work_keys_str_mv | AT lonkengngouanaconstant exchangeratevolatilityunderpegdotradepatternsmatter |