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...

Currency boards operate differently from standard pegs. The former exhibit greater currency stability and lower transaction costs, inflation, and nominal interest rates, but are limited in their use of devaluation. We extend Drazen and Masson’s (1994) signaling model to consider the choice...

This paper examines the relative importance of external shocks as sources of business cycle fluctuations in Mexico, and identifies the dynamic responses of domestic output to foreign disturbances. Using a VAR model with block exogeneity restrictions, it finds that U.S. shocks explain a large...

The member states of the South Asian Association for Regional Cooperation have set as a target the achievement of an economic union by 2020. Reaching this goal will require greater levels of monetary cooperation. How should this be achieved? Data from South Asia suggest that member states have...

This paper analyzes the impact of capital inflows and exchange rate flexibility on the real exchange rate in developing countries based on panel cointegration techniques. The results show that public and private flows are associated with a real exchange rate appreciation. Among private flows,...

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

This paper uses three methods to assess movements of real exchange rates in the ECCU over time. First, the purchasing power parity hypothesis is tested and then used to provide a benchmark for equilibrium real exchange rates in the region. Second, a fundamentals-based equilibrium real exchange...

This 2005 Article IV Consultation highlights that Guinea’s economic performance has deteriorated in recent years, largely as a result of a weak policy framework and against a background of mounting regional insecurity and low prices for its main commodity exports. Economic growth since...

This paper analyzes export performance in the Middle East and North Africa (MENA) using a gravity model applied to panel data. It addresses two questions: (i) are there significant unexploited export markets for the MENA region?; and (ii) have integration efforts with the EU since the mid-1990s...

Over the past decade or so, Tunisia has experienced a strong economic performance while pursuing a constant real exchange rate rule (CRERR). The limitations of this rule are now beginning to emerge in the context of a more open economy, regional integration, a more market-based monetary policy,...