The debate about the appropriate choice of exchange rate regime is fundamental in international economics. This paper develops a small open-economy model with balance sheet effects and compares the performance of fixed and flexible exchange rate regimes. The model is solved up to a second-order...

When does trade become a one-way relationship? We study bilateral trade balances for a sample of 18 European countries over the period from 1948 through 2008. We find that, with the introduction of the euro, trade imbalances among euro area members widened considerably, even after allowing for...

This paper provides a brief overview of the evolution of exchange rate policy in the Islamic Republic of Iran from 1993 to 2002 and reviews the basic criteria for the choice of the exchange rate regime in the medium term. The analysis highlights the merits of an intermediate regime which would...

Beginning in 1985 Italy embarked on a path of progressive removal of its system of controls on portfolio investment, a process formally completed with the abolition of all remaining restrictions in 1990. In this paper we review this policy of capital liberalization and integrate the analysis...

India’s strong growth and macroeconomic stability is owed to its sound macroeconomic policies and past structural reforms. Swelling capital inflows have highlighted the key policy challenges: managing financial globalization and tackling the supply constraints to growth. Monetary...

This 2008 Article IV Consultation highlights that Tunisia’s sound economic policies and pragmatic approach to structural reforms continue to bear fruit, as evidenced by strong growth and improved social indicators. Real GDP growth averaged 5 percent a year while the macroeconomic and...

This paper addresses analytical aspects of exchange rate policy and emphasizes the relationship among exchange rate flexibility, financial discipline, and international competitiveness.

We assess monetary regime options for Latin American countries. The costs of a common currency are likely to outweigh its benefits, as those countries face diverse economic shocks, do not trade much with each other, and are affected by common international financial shocks only to the same...

This 2007 Article IV Consultation highlights that Indonesia’s economic performance has been strong since the last Article IV Consultation. Supported by sound policies and a favorable external environment, output has grown strongly, inflation has stabilized, and international reserves have...

Botswana's successive currency devaluations and recent move from a fixed to a crawling peg exchange rate regime raise the question of whether the exchange rate might be misaligned with economic fundamentals. This paper, applying the behavioral equilibrium exchange rate (BEER) approach, analyzes...