Carry trade and exchange-rate regimes
By: Laura Alfaro, Fabio Kanczuk
Contributors: Kanczuk, Fabio, 1969-; Harvard Business School
Series: Working paper / Harvard Business School -- 13-074; Working paper (Harvard Business School) -- 13-074
Publisher: Harvard Business School
Published: 2013
Place of publication: Boston ]
Language: eng
Number of pages: 29
Description: Carry-trade activity and foreign participation in local-currency-bond markets in emerging countries have increased dramatically over the past decade. In light of these trends, we revisit the question of the optimal exchange-rate regime when developing countries can borrow internationally with local-currency-denominated debt. We find that, as local currency bond markets develop, a "pseudo-flexible regime," whereby a country accumulates reserves in conjunction with debt, to be the best policy alternative under real external shocks for emerging nations.
Notes: "February 2013" -- Publisher's website.

Includes bibliographical references (pages 23-25).