A WCU-based currency board as a sustainable exchange rate regime

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This paper argues that avoidance of economic and financial crises requires that the values of national currencies maintain such real values as to be consistent with the underlying economic fundamentals. The nominal values of the currencies should therefore adjust spontaneously in response to changes in nominal values to preserve the underlying needed real values. When the fundamentals require a change in the real exchange rate, a mechanism for adjustment has to be in place. This paper recommends adopting a monetary anchor in terms of stable purchasing power vis-a-vis a comprehensive basket of world output, and introducing a crawling peg mechanism vis-a-vis this anchor.
Original languageEnglish
Title of host publicationAsian economic dynamism in the age of globalisation
PublisherCentre for Asian Pacific Studies
Number of pages14
ISBN (Print)9789627365013
Publication statusPublished - 1 Jan 2006

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