United States Economic Interests and Crawling Peg Systems
In judging the attractiveness of various types of exchange rate arrangements it is important to make clear the criteria being used for evaluation. Is the regime under analysis optimal for a particular country on first-best economic grounds (and how are various economic criteria balanced); is it superior to some specific alternative; or would it be likely to be so costly that it should be judged unacceptable, even if it brought considerable benefits on other grounds? There is of course considerable scope for ambiguity even in this three-way clarification, but it does represent a substantial headstart in interpreting statements such as ‘I favour’ or ‘I oppose a crawling peg exchange rate system’, or some particular variant thereof.
KeywordsEurope Expense Stein Volatility Librium
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