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Exchange rate policy in developing countries

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  • Corden, W. Max

Abstract

A distinction can be made between two approaches to exchange rate policy in developing countries. The"real targets"and the"nominal anchor"approach. Part I of this report gives an overview of the two approaches and the assumptions they imply. Part II expounds the"real targets"approach and its implications in some detail. This is really the approach that is now orthodox. Part III expounds the"nominal anchor"approach and its implications, and considers to what extent it might explain the low inflation experiences of the many countries where exchange rates have been (more or less) fixed for long periods. Part IV considers the implications of increasing capital mobility for exchange rate policy, and Part V has some conclusions for policy. The paper draws on examples of exchange rate policies and experiences of a group of seventeen developing countries.

Suggested Citation

  • Corden, W. Max, 1990. "Exchange rate policy in developing countries," Policy Research Working Paper Series 412, The World Bank.
    • Handle: RePEc:wbk:wbrwps:412
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    Citations

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    Cited by:

    1. Athukorala, Premachandra & Rajapatirana, Sarath, 1993. "Domestic financial market and the trade liberalization outcome: Evidence from Sri Lanka," World Development, Elsevier, vol. 21(7), pages 1191-1203, July.
    2. Devarajan, Shantayanan & Rodrik, Dani, 1991. "Do the benefits of fixed exchange rates outweigh their costs? The Franc Zone in Africa," Policy Research Working Paper Series 777, The World Bank.
    3. Eugenio Diaz Bonilla & Hector E. Schamis, 1999. "La economía política de las políticas de cambio en Argentina," Research Department Publications 3079, Inter-American Development Bank, Research Department.
    4. Londero, Elio, 1997. "Trade Liberalization with a Fixed Exchange Rate," MPRA Paper 85340, University Library of Munich, Germany.
    5. Eugenio Diaz Bonilla & Hector E. Schamis, 1999. "The Political Economy of Exchange Rate Policies in Argentina," Research Department Publications 3078, Inter-American Development Bank, Research Department.
    6. Ndung'u, N.S., 1999. "Monetary and Exchange Rate Policy in Kenya," Papers 94, African Economic Research Consortium.
    7. Ross Garnaut, 1991. "Exchange Rate Regimes in the Asian‐Pacific Region," Asian-Pacific Economic Literature, The Crawford School, The Australian National University, vol. 5(1), pages 5-26, March.
    8. Bonilla, Eugenio Diaz, 2008. "Global macroeconomic developments and poverty:," IFPRI discussion papers 766, International Food Policy Research Institute (IFPRI).

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