We estimate a dynamic, stochastic, general equilibrium model of the Brazilian economy taking into account the transition from a currency peg to inflation targeting that took place in 1999. The estimated model exhibits quite different dynamics under the two monetary regimes. We use it to produce...

This paper theoretically evaluates the dynamic effects of a shift in an exchange rate system from a fixed regime to a basket peg, or to a floating regime, and obtains transition paths for the shift based on a dynamic stochastic general equilibrium model of a small open economy. We apply...

This paper adopts and develops the ‘fear of floating’ theory to explain the decision to implement a de facto peg, the choice of anchor currency among multiple key currencies and the role of central bank independence for these choices. We argue that since exchange rate depreciations are...