Exchange Rate Stability and its Implications for Economic Development of the Less Developed Countries

• Main Author: Gowon, Chileshe Hilda Wabo
• Format: Others
• Published: DigitalCommons@USU 1985
• Subjects: Exchange Rate Stability; Implications; Economic Development; Less Developed Countries; Economics
• Online Access: https://digitalcommons.usu.edu/etd/4096; https://digitalcommons.usu.edu/cgi/viewcontent.cgi?article=5134&context=etd

The question that Less Developed Countries have faced since the advent of floating exchange rates among the Industrial Countries is whether they should also adopt a floating exchange rate system. The Less Developed Countries have opted for a pegged exchange rate system, since their economic characteristics and institutional structure indicate that floating for the Less Developed Countries would result in volatile or unstable exchange rates. Since Less Developed Countries peg t heir exchange rates in the presence of flexible rates among industrial countries, the Less Developed Countries pegged exchange rates move in accordance to the exchange rates to which they are pegged. This study examines whether there are differences in the variability of the different effective exchange rate indices or currency baskets. Specifically the export, import and total trade weighted effective exchange rates for three African Less Developed Countries are examined. Currency baskets are varied by changing the number of currencies coefficent of variation included in was used the basket. The to compare the variability in the different effective exchange rates.