OECD Development Centre Working Papers

The OECD Development Centre links OECD members with developing and emerging economies and fosters debate and discussion to seek creative policy solutions to emerging global issues and development challenges. This series of working papers is intended to disseminate the OECD Development Centre’s research findings rapidly among specialists in the field concerned. These papers are generally available in the original English or French, with a summary in the other language.

English, French

Float in Order to Fix?

Lessons from Emerging Markets for EU Accession Countries

The so-called “accession economies” preparing to enter the European Union are experiencing increased inward capital flows based upon positive interest spreads and expectations of currency appreciation. While the authorities of these countries have tried to manage these flows and to prevent unjustified appreciation of their currencies, the policy mix they may be tempted to apply can benefit from experiences elsewhere.

Episodes of heavy capital inflows are well known to emerging markets and have often ended in tears. The 1990s saw three separate regional currency crises: the European crisis of 1992-93, the Latin American crisis 1994-95, and the Asian crisis 1997- 98 followed by crises in Russia and Brazil, and recently by Turkey and Argentina.

Obviously, a major currency crisis every 24 months is too much for policy makers’ comfort. The virulence, speed and contagion of financial crises that have hit prospective entrants to rich-country clubs repeatedly over the past two decades have ...


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