A common argument for pegging the exchange rate is that it enforces discipline on domestic monetary policy, thus stabilizing inflation expectations. This paper argues that this reasoning does not necessarily apply to East Asia, as the nominal exchange rate pegging policies of these economies are...

A small, open macroeconomic model that accounts for new financial accelerator effects (the effects of fluctuations in asset prices on bank credit and economic activity) is developed to evaluate various policy rules for inflation targeting. Given conditions in asset markets and the fragility of...

A large literature on the appropriate sequencing of financial liberalization suggests that removing capital controls prematurely may contribute to currency instability. This paper investigates whether legal restrictions on international capital flows are associated with greater currency...

The paper examines interest rates in nine Latin American and East Asian countries during the period 1987-1994. The goal is to discover why interest rates have remained high, failing to converge to U.S. levels, despite capital market liberalization and a resurgence of portfolio capital inflows...