We demonstrate how to identify monetary policy under fixed exchange rates in a structural vector autoregression (SVAR) using Denmark as a case study. The identifying restrictions are compared to SVARs for flexible exchange-rate regimes. Our basic model generates a plausible central-bank reaction...

Fixed and flexible exchange rates each have advantages, and a country has the right to choose the regime suited to its circumstances. Nevertheless, several arguments support the view that the de facto dollar peg may now have outlived its usefulness for China. (i) Although foreign exchange...