Why Do Countries Peg the Way They Peg? The Determinants of Anchor Currency Choice

Nienke Oomes and Christopher Meissner

No 2008/132, IMF Working Papers from International Monetary Fund

Abstract: What determines the currency to which countries peg or "anchor" their exchange rate? Data for over 100 countries between 1980 and 1998 reveal that trade network externalities are a key determinant. This implies that anchor currency choice may well be suboptimal in that certain currencies, e.g., the U.S. dollar, could be oversubscribed. It also implies that changes in anchor choices by a small number of countries can have large and rapid effects on the international monetary system. Other factors found to be related to anchor choice include the symmetry of output shocks and the currency denomination of liabilities.

Keywords: WP; anchor currency choice; U.S. dollar; network externality; dollar anchor; currency denomination (search for similar items in EconPapers)
Pages: 45
Date: 2008-05-01
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Citations: View citations in EconPapers (9)

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Related works:
Journal Article: Why do countries peg the way they peg? The determinants of anchor currency choice (2009)
Working Paper: Why Do Countries Peg the Way They Peg? The Determinants of Anchor Currency Choice (2006)
Working Paper: Why Do Countries Peg the Way They Peg? The Determinants of Anchor Currency Choice (2006)
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