>FLASH ECONOMICS (ECONOMIC RESEARCH)

The issue of exchange-rate policy for emerging countries is not resolved

The recent period has demonstrated that there is no “right choice" in the currently available "menu" of exchange-rate policies for emerging countries:

■ countries that chose flexible exchange rates were initially faced with an excessive appreciation in their exchange rates due to capital inflows, and then a fall in the exchange rate due to drastic capital outflows (and will perhaps now be faced with a return of excessive
inflows);

■ countries that chose pegging (in one form or another - peg, currency board, etc.) of their exchange rates to a major currency were faced with inflation and excessive credit growth due to the unsuitable nature - for these countries - of the monetary policy conducted for the dollar or the euro; but also an enormous risk linked to the development of foreign-currency borrowing when exchange-rate stability called for high domestic interest rates, and not interest rates aligned on the low level of dollar and euro interest rates.

What are the solutions:
■ monetary unification? But this is difficult to imagine for countries with price and wage levels that differ significantly from those prevailing in the United States or the euro zone;

■ exchange-rate flexibility with restrictions on speculative capital flows seems to be the most robust system.

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