IMF paper looks at exchange rate volatility and currency pegs
A new International Monetary Fund research paper asks whether trade patterns matter to exchange rate volatility seen under peg circumstances.
Author Constant Lonkeng Hgouana assesses the role of trade patterns in shaping the volatility of the effective exchange rate under two alternative peg regimes: a hard peg to a single currency and a peg to a basket of currencies.
The paper finds that the nominal effective exchange rate of the union was twice as volatile under the hard peg to the euro as it
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