Write a research project discussing a topic on Fear of Floating a Currency
The paper should follow the basic structure:
I. The paper should start with a short introduction/motivation section. Why should anyone care about your topic? Here talk about specifics, current events, politics, etc. (~1 pg). Be sure to establish a clear thesis (argument/focus) and lay out preliminary support you will reference throughout the next section.
- Use sources from reputable publications here (NY Times, Wall Street Journal, Economist, etc)
II. Next, you are expected to review the major contributions on the topic and the current state of the literature, citing at minimum five sources scholarly sources. This should be the bulk of your paper (~3-4 pgs). It is a literature review of your topic. If you have a specific topic (e.g. a specific trade deal, etc) then be sure to generalize your topic for this section. So if you were discussing NAFTA or Brexit, you would want to discuss recent literature on free trade agreements/areas for the literature review. Here you want to discuss general theories on your topic so that you can establish the necessary economic relationships.
- Use scholarly sources here (Journal Articles, Federal Reserve, IMF or NBER Studies, etc)
III. Extension. You just reviewed the literature on a specific subject. Here you should suggest an extension to the current literature (~.5 pgs). What is missing from the literature you reviewed (could be a new data set, case study, research methodology)?
IV. Conclusion. Wrap it up. Tie together the support presented above to call back to main thesis (~ .5 pg).
V. Reference Section that links to in-text citations. Use any citation format you choose (APA, MLA, etc), just be consistent throughout the paper. If you choose to, you can simply footnote within the text and forego this section.
Introduction
The term "fear of floating" refers to the situation in which a country prefers a fixed exchange rate to a floating exchange rate regime. This is more relevant in emerging economies, especially when they suffered from financial crisis in last two decades.
There are a number of reasons why countries may be reluctant to float their currencies. One reason is that floating exchange rates can be volatile, which can make it difficult for businesses to plan for the future. Another reason is that floating exchange rates can make it more difficult for governments to control inflation.
In recent years, there has been a growing debate about the merits of floating exchange rates. Some economists argue that
floating exchange rates are more efficient than fixed exchange rates, and that they help to promote economic growth. Others argue that floating exchange rates can be destabilizing, and that they can lead to financial crises.
Literature Review
The literature on fear of floating is extensive. Some of the key contributions to the literature include:
- Levy Yeyati and Sturzenegger (2003): This paper provides a comprehensive survey of the literature on fear of floating. The authors argue that fear of floating is a complex phenomenon, and that it is driven by a variety of factors, including:
- The risk of currency depreciation
- The loss of monetary policy autonomy
- The need to maintain a competitive export sector
- Calvo and Reinhart (2002): This paper provides empirical evidence on the prevalence of fear of floating. The authors find that a large number of countries have adopted intermediate exchange rate regimes, which are characterized by a combination of fixed and floating exchange rates.
- Eichengreen and Hausmann (1999): This paper argues that fear of floating is a rational response to the experience of financial crises in the 1990s. The authors argue that floating exchange rates can make it more difficult for governments to manage financial crises, and that this can lead to increased economic instability.
Extension
The literature on
fear of floating is still evolving. One area where there is a need for further research is in the understanding of the factors that drive fear of floating. In particular, it would be useful to know more about the relative importance of the different factors that have been identified in the literature.
Another area where there is a need for further research is in the development of policies to address fear of floating. There is some evidence that intermediate exchange rate regimes can help to mitigate the negative effects of fear of floating. However, more research is needed to determine the optimal design of intermediate exchange rate regimes.
Conclusion
The fear of floating is a complex phenomenon that has important implications for economic policy. The literature on fear of floating is extensive, but there is still a need for further research. The development of policies to address fear of floating is an important area for future research.
References
- Calvo, G., & Reinhart, C. M. (2002). Fear of floating. Quarterly Journal of Economics, 117(2), 375-408.
- Eichengreen, B., & Hausmann, R. (1999). Exchange rates and financial fragility. NBER Working Paper No. 7418.
- Levy Yeyati, E., & Sturzenegger, F. (2003). Fear of floating. NBER Working Paper No. 9908.
Appendix
In addition to the sources cited above, the following sources were also consulted in the preparation of this paper:
- International Monetary Fund (IMF). (2016). Floating exchange rates. IMF Policy Paper.
- Organization for Economic Co-operation and Development (OECD). (2015). Floating exchange rates: The impact on economic performance and policy choices. OECD Economic Policy Paper.
- World Bank. (2014). Floating exchange rates: Managing risks and reaping rewards. World Bank Policy Note.