Managed Floating Plus

by Morris Goldstein

Overview

In this analysis Morris Goldstein examines currency regime choices for emerging economies that are heavily involved with private capital markets. The author argues that the best regime choice for such economies would be managed floating plus, where "plus" is shorthand for a framework that includes inflation targeting and aggressive measures to discourage currency mismatching. Goldstein argues that if managed floating were enhanced in this way, it would retain the desirable features of a flexible rate regime while addressing the nominal anchor and balance-sheet problems that have historically underpinned a "fear of floating" and handicapped the performance of managed floating in emerging economies. The author also shows why managed floating plus is superior to four alternative currency-regime options—an adjustable peg system, a "BBC (basket, band, crawl) regime," a currency board, and dollarization.

Product Details

ISBN-13:	9780881323368
Publisher:	Peterson Institute for International Economics
Publication date:	03/28/2002
Series:	Policy Analyses in International Economics , #66
Edition description:	New Edition
Pages:	112
Product dimensions:	5.90(w) x 8.90(h) x 0.30(d)
Age Range:	18 Years

About the Author

Morris Goldstein, nonresident senior fellow, has held several senior staff positions at the International Monetary Fund (1970–94), including Deputy Director of its Research Department (1987–94). From 1994 to 2010, he held the Dennis Weatherstone Senior Fellow position at the Peterson Institute. He has written extensively on international economic policy and on international capital markets.

Table of Contents

	Preface	vii
	Acknowledgments	xi
1	Introduction: What is the Best Currency Regime?	1
	Dissatisfaction with Currency Regimes	2
	Why Managed Floating Plus?	3
	Plan of the Book	6
2	Methodological Pitfalls in Choosing among Currency Regimes	7
	Classifying Regimes	7
	Robustness of Regime Comparisons	9
	Constraints on Choosing a Regime	11
	Concluding Note	12
3	Adjustable Peg Regimes	13
4	The BBC Regime	17
	Advantages of BBCs	17
	Disadvantages of BBCs	18
5	Currency Boards	21
	Advantages of Currency Boards	21
	Drawbacks of Currency Boards	24
	Currency Boards and Lender-of-Last-Resort Situations	29
	Summing Up	31
6	Dollarization	33
	Advantages of Dollarization	34
	Disadvantages of Dollarization	37
	Summing Up	41
7	Managed Floating Plus	43
	What Is a Managed Floating Plus Regime?	43
	The Case for Managed Floating Plus	47
	Concluding Remarks	67
	References	69
	Index	77
	Tables
Table 7.1	Share of external debt denominated in the domestic currency, end of 1999	53
Table 7.2	Foreign exchange regulations for banks	57