01993cas a2200241 a 4500 AALejournalIMF003095 230101c9999 xx r poo 0 0eng d 5.00 USD 9781451856286 1018-5941 BD-DhAAL BD-DhAAL Beadle, Sibel. Choosing the Correct Currency Anchor for a Small Economy : The Case of Nepal / Sibel Beadle. Washington, D.C. : International Monetary Fund, 2004. 1 online resource (15 pages) IMF Working Papers <strong>Off-Campus Access:</strong> No User ID or Password Required <strong>On-Campus Access:</strong> No User ID or Password Required Electronic access restricted to authorized BRAC University faculty, staff and students This paper uses the Sjaastad model to estimate the optimal currency area for the Nepalese rupee and concludes that, currently, Nepal may be reasonably well off with its peg to the Indian rupee. As its economy opens and its trade base and trading partners expand, it may want to reevaluate whether moving toward an exchange rate basket including the U.S. dollar may be a better policy choice. The regression results indicate that, currently, the prices of imported goods in Nepal are solely influenced by India, suggesting that with the peg to the Indian rupee, Nepal can isolate the import side of its economy completely from external shocks. On the export side, the regression results indicate that Nepalese export prices seem, to a large extent, to be influenced by U.S. prices. However, the export price index had to be constructed, and the construction methodology is likely to entail an overestimation of the impact of the U.S. dollar. Mode of access: Internet IMF Working Papers; Working Paper ; No. 2004/142 Full text available on IMF http://elibrary.imf.org/view/journals/001/2004/142/001.2004.issue-142-en.xml IMF e-Library