02076cas a2200241 a 4500 AALejournalIMF011735 230101c9999 xx r poo 0 0eng d 5.00 USD 9781475502251 1018-5941 BD-DhAAL BD-DhAAL Lonkeng Ngouana, Constant. Exchange Rate Volatility Under Peg : Do Trade Patterns Matter? / Constant Lonkeng Ngouana. Washington, D.C. : International Monetary Fund, 2012. 1 online resource (21 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 assesses the role of trade patterns in shaping the volatility of the effective exchange rate under two alternative peg regimes: a hard peg to a single currency and a peg to a basket of currencies. I link the changes in the nominal effective exchange rate of a pegged currency to the fluctuations of its anchor vis-a-vis other major currencies, with an emphasis on the dynamics of trade patterns. In an application to the WAEMU (West African Economic and Monetary Union), I find that the nominal effective exchange rate of the union was twice as volatile under the hard peg to the euro as it would have been under a hypothetical basket peg over the past decade. This result was driven by the substantial shifts that occurred in WAEMU trade patterns, away from euro area countries and toward the ?"BICs" (Brazil, India, and China). These findings suggest that policymakers should pay as much attention to the type of peg as to pegging in itself, with a particular focus on the dynamics of trade patterns. Mode of access: Internet IMF Working Papers; Working Paper ; No. 2012/073 Full text available on IMF http://elibrary.imf.org/view/journals/001/2012/073/001.2012.issue-073-en.xml IMF e-Library