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- Title
Exchange Rate Regime Decisions and Developing Countries.
- Authors
Gulzar, Saqib; Hui Xiao Feng
- Abstract
Selection of appropriate exchange rate regime is always a difficult decision for developing countries and assumes great importance for policymakers. After the Asian crisis, Asian countries are very sensitively and seriously considering as to which exchange rate regime is better under uncertain economic stipulations. The Asian crisis has given a great shock not only to Asian countries but also to all the emerging markets and it will take years to get rid of it. Inflation, interest rates, income levels, government control and political conditions are the common factors that sway the exchange rate. But empirical study emphasizes that while selecting an exchange rate regime, a country must consider its effects on monetary policy, fiscal policy and on microeconomic performance. Before adopting any exchange rate, the developing countries must evaluate the promised benefits and cost of each regime. It is also suggested that they must weigh up the methods of reducing latent costs of each regime. Under most economic conditions a regime of managed floating is likely to be the best solution for most of the developing countries rather than peg or free floating exchange rate regime.
- Subjects
FOREIGN exchange rates; DEVELOPING countries; PRICE inflation; INTEREST rates; FISCAL policy
- Publication
ICFAI Journal of International Business, 2008, Vol 3, Issue 4, p7
- ISSN
0973-3752
- Publication type
Article