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External Stability Under Alternative Nominal Exchange Rate Anchors: An Application to the GCC Countries

Author

Listed:
  • Mr. Zubair Iqbal
  • Mr. S. Nuri Erbas

Abstract

Import and export stability is examined under two alternative nominal exchange rate anchors, the U.S. dollar and the SDR. Stability under the two pegs depends critically on import and export elasticity with respect to exchange rates. The implications of import and export elasticity for an optimal currency basket are also explored. The elasticity estimates for the GCC countries suggest that the SDR peg may not outperform the dollar peg in improving external stability. Nevertheless, switching to some other nominal exchange rate anchor may improve external stability, a possibility that remains to be explored.

Suggested Citation

  • Mr. Zubair Iqbal & Mr. S. Nuri Erbas, 1997. "External Stability Under Alternative Nominal Exchange Rate Anchors: An Application to the GCC Countries," IMF Working Papers 1997/008, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:1997/008
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    Citations

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    Cited by:

    1. Gervais, Olivier & Schembri, Lawrence & Suchanek, Lena, 2016. "Current account dynamics, real exchange rate adjustment, and the exchange rate regime in emerging-market economies," Journal of Development Economics, Elsevier, vol. 119(C), pages 86-99.
    2. Habib, Maurizio Michael & Stráský, Jan, 2008. "Oil exporters: in search of an external anchor," Working Paper Series 958, European Central Bank.
    3. Olivier Gervais & Lawrence L. Schembri & Lena Suchanek, 2011. "External Stability, Real Exchange Rate Adjustment and the Exchange Rate Regime in Emerging-Market Economies," Discussion Papers 11-5, Bank of Canada.

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