scholarly journals Accession to the Eurozone as Lithuania’s exit strategy from the currency board system

Equilibrium ◽  
2015 ◽  
Vol 10 (3) ◽  
pp. 27
Author(s):  
Dorota Żuchowska
Keyword(s):  
Exchange Rate ◽  
Exchange Rate Policy ◽  
Currency Board ◽  
Convergence Criteria ◽  
Exit Strategy ◽  
Rate System ◽  
Starting Point ◽  
Rate Policy ◽  
Exchange Rate System ◽  
Board System

In the years 2004-2014 the Lithuania’s exchange rate policy was based on a rigid currency board system. After a period of uncontested success in the fight against inflation in the first decade of the transition and economic growth, entering the ERM II in 2004 and efforts to adopt the euro were treated as an optimal exit strategy from the currency board system. However, the consequences of this exchange rate system in the following years (until 2014) prevented Lithuania from meeting the economic convergence criteria. The starting point for the research is based on the theoretical analysis of literature studying benefits and risks associated with the use of the currency board system by the monetary authorities. The empirical analysis refers to the case of Lithuania and covers the years 2004-2014. The purpose of this analysis is to look at the effects of the use of the currency board system from the perspective of the convergence criteria of monetary nature and the extent of their implementation in the absence of opportunities for autonomous monetary policy.

scholarly journals On the Maintenance Costs and Exit Costs of the Peg in Hong Kong

2005 ◽  
Vol 08 (03) ◽  
pp. 377-403 ◽  
Author(s):  
Paul S. L. Yip
Keyword(s):  
Hong Kong ◽  
Exchange Rate ◽  
Policy Maker ◽  
Band System ◽  
Currency Board ◽  
Rate System ◽  
Maintenance Costs ◽  
Exit Costs ◽  
Exchange Rate System ◽  
Board System

This paper attempts to pioneer a discussion on the exit and maintenance costs of the Currency Board System (CBS) in Hong Kong, and hopes to invite more debate on the issue. It suggests that the exit costs will depend on the timing of an exit, whether there are supplementary packages to mitigate the exit costs, and the choice of an alternative exchange rate system. In particular, it suggests that the monitoring band system favored by Williamson (2000) could help to reduce the exit costs. In addition, the paper points out that there are ways to reduce both the exit and maintenance costs. It then proposes a reform that could benefit the economy regardless of whether the policy maker eventually chooses to continue with or abandon the peg. The study is not only crucial to Hong Kong, but also important to other economies with a CBS as well as to the debate on the choice of exchange rate system.

CHINA’S EXCHANGE RATE SYSTEM REFORM: TWO POTENTIAL MISTAKES AND THE RECOMMENDED LONG-TERM SYSTEM

2016 ◽  
Vol 61 (02) ◽  
pp. 1640025
Author(s):  
PAUL S. L. YIP
Keyword(s):  
Exchange Rate ◽  
Capital Mobility ◽  
Exchange Rate Policy ◽  
Chinese Economy ◽  
System Reform ◽  
Rate System ◽  
Floating Exchange Rate ◽  
Rate Policy ◽  
Exchange Rate System

Further to the author’s recommended transitory and medium-term exchange rate system reforms that was implemented in China since July 2005, this paper explains that: (1) a long-term reform towards a floating exchange rate system with free capital mobility will cause huge damages to the Chinese economy. It then proposes a long-term exchange rate system that would probably benefit China the most; and (2) there is a serious mistake in China’s latest exchange rate policy: The Chinese central bank has mistakenly allowed the renminbi exchange rate to rise with the strong rebound of the US dollar. This will cause not only a substantial drag in China’s export and GDP growth, but will also eventually make China’s financial and economic system vulnerable to a highly disruptive correction in the renminbi exchange rate.

Thailand, Malaysia and the Philippines: Currency Crisis

1997 ◽  
Vol 8 (5) ◽  
pp. 115-115
Keyword(s):  
Exchange Rate ◽  
The Philippines ◽  
Exchange Rate Policy ◽  
Negative Effects ◽  
Rate System ◽  
Bank Rate ◽  
Economic Fundamentals ◽  
Recent Developments ◽  
Rate Policy ◽  
Exchange Rate System

In response to recent developments, Thailand's exchange rate system has been changed, effective July 2, 1997, to a managed float, with the value of the baht being determined by market forces in line with economic fundamentals. To support the new exchange rate policy, the Bank of Thailand has raised the Bank Rate from 10.5 percent to 12.5 percent. The Thai authorities are also considering supplementary measures to alleviate potential negative effects on debt servicing and prices that may result from adjustments in the value of the baht.

scholarly journals Währungspolitik Im Dienste Von Entwicklung: Immer Noch Ein Forschungsprogramm

2004 ◽  
Vol 53 (2) ◽  
Author(s):  
Friedrich L. Sell
Keyword(s):  
Economic Development ◽  
Exchange Rate ◽  
Financial Markets ◽  
Exchange Rate Policy ◽  
Rate System ◽  
Rate Policy ◽  
Exchange Rate System ◽  
Economic Reasoning ◽  
And Control ◽  
Working Hypotheses

AbstractIn this paper, we first formulate a number of working hypotheses about the likely contributions of exchange rate policy to economic development on the background of the famous “trilemma” which exchange rate policy has to face. Then, we broadly review experiences made by developing countries with different exchange rate regimes in the past 30 years. We find that in addition to the classical trilemma put forward by Bob Mundell (1968) vis-à-vis the exchange rate system, emerging economies have to solve at least one more trilemma located in their domestic financial markets. We show that the alternatives “flexible” or “fixed” exchange rates can only be chosen based on sound economic reasoning with regard to the stance and control of domestic financial markets. From this perspective, one can expect contributions to economic development and even give some advice to China and its current exchange rate policy.

Exchange rate system, policy distortions, and the maintenance of trade dependence

1982 ◽  
Vol 36 (4) ◽  
pp. 715-739 ◽  
Author(s):  
Bruce E. Moon
Keyword(s):  
Exchange Rate ◽  
Developed Countries ◽  
The United States ◽  
Exchange Rate Policy ◽  
Rate System ◽  
Rate Policy ◽  
Exchange Rate System ◽  
The Exchange Rate ◽  
Actual Exchange ◽  
External Actors

Two central tenets of dependency theory are supported by the analysis of the causes and consequences of the exchange rate policies of less developed countries (LDCs). First, one critical component—high partner trade concentrations—is recreated by the choice of exchange arrangements. Specifically, nations that have maintained a dollar peg have significantly increased their concentration of trade with the United States since 1973. This occurs because of the exchange rate risk present in any transaction that involves a dollar-pegged currency and any other major currency against which it floats. Second, such an effect produces incentives for internal and external actors with an interest in the partner composition of future trade to influence the exchange rate policy of LDCs. Various components of the dependence situation that strengthen the role of such actors—partner trade concentrations, treaty arrangements, foreign aid, etc.—are significantly correlated with actual exchange rate practice. Thus, exchange rate policy is a linch-pin mechanism, in that it both manifests distortions produced by dependency and further acts to recreate a vital aspect of the situation that gave rise to the distortions.

TO PEG OR NOT TO PEG?

2007 ◽  
Vol 52 (01) ◽  
pp. 39-52 ◽  
Author(s):  
ANTHONY J. MAKIN
Keyword(s):  
Exchange Rate ◽  
National Income ◽  
Real Income ◽  
Exchange Rate Policy ◽  
Monetary Shocks ◽  
Rate System ◽  
Floating Exchange Rate ◽  
Rate Policy ◽  
Exchange Rate System ◽  
Real Shocks

This paper presents a simple framework for analyzing the macroeconomic effects of internal and external shocks under polar exchange rate regimes. It highlights the significance of fluctuations in competitiveness and real income for exchange rate policy, revealing that positive (negative) real shocks increase (decrease) national income and strengthen (weaken) the balance of payments and exchange rate. It also shows that, ceteris paribus, pegged exchange rates facilitate real income growth for emerging economies while lowering its variability when exports and productivity are improving and monetary shocks predominate. Alternatively, a floating exchange rate system may be most appropriate for less open advanced economies with relatively stable monetary sectors that frequently experience negative real shocks.

Global Monetary Cooperation and the Exchange Rate System

2017 ◽  
Author(s):  
José Antonio Ocampo
Keyword(s):  
Exchange Rate ◽  
Exchange Rate Policy ◽  
Critical Area ◽  
Macroeconomic Policies ◽  
Rate System ◽  
Monetary Cooperation ◽  
System P ◽  
Rate Policy ◽  
Exchange Rate System ◽  
Basic Objective

This chapter looks at historical and current frameworks to manage macroeconomic linkages among economies. The basic objective of cooperation in this area is to guarantee the consistency of the macroeconomic policies of major economies, to avoid both unsustainable global booms and crises. This requires an adequate supply of liquidity at the international level, the topic analysed in Chapter 2, as well sustainable payments balances and an adequate exchange rate system, two areas of cooperation analysed here. The chapter looks first at the evolving nature of global imbalances. It then analyses the mechanisms that have been put in place at different times to manage macroeconomic linkages among major economies, before finally considering the current exchange rate ‘non-system’. The chapter claims that exchange rate policy is perhaps the most critical area for which macroeconomic policy cooperation should be strengthened, particularly by moving to a system of reference rates among major currencies.

THE CASE FOR AN INTERMEDIATE EXCHANGE RATE REGIME

2007 ◽  
Vol 52 (03) ◽  
pp. 295-307 ◽  
Author(s):  
JOHN WILLIAMSON
Keyword(s):  
Exchange Rate ◽  
Inflation Targeting ◽  
Exchange Rate Regime ◽  
Exchange Rate Policy ◽  
Rate System ◽  
Advantages And Disadvantages ◽  
Economics Profession ◽  
Rate Policy ◽  
Exchange Rate Changes ◽  
Floating Rates

The argument that any exchange rate regimes other than firmly fixed and freely floating rates were infeasible — the so-called bipolarity thesis — acquired great popularity in the wake of the Asian crisis of a decade ago, but it has almost vanished today. One reason is surely the unkind empirical evidence, which shows that intermediate regimes — measured as those where both reserve and exchange rate changes lie in an intermediate range — are not in fact tending to disappear (Levy Yeyati and Sturzenegger, 2002). Another reason is the recognition that exchange rate policy should have other objectives besides avoiding crises, and that in the world we live in today it is reasonable to give these other objectives a significant priority. And perhaps a third factor is growing recognition that it is possible to design or operate intermediate regimes in ways that avoid exposing them to the dangers that were focused on by the disciples of bipolarity. This article starts by distinguishing the options that countries face in choosing an exchange rate regime. It examines the advantages and disadvantages of each of them, finally suggesting that for most countries the real choice lies between freely floating rates, floating rates disciplined by a reference rate system, and an ill-defined managed floating with the management undefined. Three issues may influence the choice between those alternatives: transparency; perceived consistency with that pillar of current macroeconomic thinking, inflation targeting; and the theory of what determines exchange rates. In the latter context, it is argued that the current conventional wisdom of the economics profession is wrong, and that a more convincing diagnosis of the process of exchange rate determination lends support to the proposal for a reference rate system.

REAL EXCHANGE RATE BEHAVIOUR UNDER HONG KONG'S LINKED EXCHANGE RATE SYSTEM: AN EMPIRICAL INVESTIGATION

2002 ◽  
Vol 05 (01) ◽  
pp. 55-78 ◽  
Author(s):  
ZHICHAO ZHANG
Keyword(s):  
Hong Kong ◽  
Exchange Rate ◽  
Real Exchange Rate ◽  
Cointegration Analysis ◽  
Currency Board ◽  
Equilibrium Exchange Rate ◽  
Rate System ◽  
Equilibrium Exchange ◽  
Exchange Rate System ◽  
Rate Behaviour

In a behavioural equilibrium exchange rate model, this study investigates the movements of the real exchange rate of the Hong Kong dollar under the currency board arrangement from 1984 to 1998. Cointegration analysis based on Johansen approach is applied to derive the equilibrium real exchange rate in behavioural sense for the Hong Kong dollar. Evidence shows that during the period under investigation, the Hong Kong dollar was initially undervalued when the currency board arrangement was installed. It moved in closer line with the equilibrium rate after 1985 and generally remained moderately undervalued until 1993. Then the currency became overvalued following the upsurge of domestic demand and lingered into 1995 before an adjustment took place latter that year. But except for a few quarters, the overvaluation was not substantial and chronic. On the whole, the Hong Kong dollar seemed to have performed well in the period under examination. In most cases, the currency was actually undervalued. When the Asian financial crisis broke out, the currency was in effect already in a process of adjustment, depreciating form an overvalued level.

A RE-STATEMENT OF SINGAPORE'S EXCHANGE RATE AND MONETARY POLICIES

2003 ◽  
Vol 48 (02) ◽  
pp. 201-212 ◽  
Author(s):  
PAUL S. L. YIP
Keyword(s):  
Hong Kong ◽  
Exchange Rate ◽  
Band System ◽  
Exchange Rate Regime ◽  
Exchange Rate Policy ◽  
Currency Board ◽  
Monetary Policies ◽  
Rate Level ◽  
Rate Policy ◽  
Exchange Rate Level

This policy note, which focuses on Singapore's monetary and exchange rate policies, has a number of objectives. First, it highlights the fact that the Monetary Authority of Singapore (MAS) is equipped with a powerful tool to target the exchange rate level it desires (within limits). Second, it reviews Singapore's exchange rate policy since 1980 and explains that the de facto policy is far more complicated and flexible than the simplistic but oft-noted description of the MAS pursuing a "strong Singapore dollar" policy. Specifically, the paper argues that Singapore's exchange rate regime is an ideal example of the monitoring band system favoured by John Williamson. Third, the paper contrasts the Singapore currency regime with the relatively more inflexible currency board arrangement (CBA) operated in Hong Kong. The relative advantages of Singapore's flexible monitoring band arrangement over Hong Kong's rigidly fixed CBA are highlighted.

Sign in / Sign up

Export Citation Format

Share Document