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Explaining the Transition between Exchange Rate Regimes

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  • Paul Masson
  • Francisco J. Ruge-Murcia

Abstract

This paper studies the transition between exchange rate regimes using a Markov chain model with time-varying transition probabilities. The probabilities are parameterized as nonlinear functions of variables suggested by the currency crisis and optimal currency area literature. Results using annual data indicate that inflation and, to a lesser extent, output growth and trade openness help explain the exchange rate regime transition dynamics. Copyright The editors of the "Scandinavian Journal of Economics", 2005 .

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Bibliographic Info

Article provided by Wiley Blackwell in its journal The Scandinavian Journal of Economics.

Volume (Year): 107 (2005)
Issue (Month): 2 (06)
Pages: 261-278

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Handle: RePEc:bla:scandj:v:107:y:2005:i:2:p:261-278

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References

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  1. Michael Kremer & Alexei Onatski & James Stock, 2001. "Searching for Prosperity," NBER Working Papers 8250, National Bureau of Economic Research, Inc.
  2. Reinhart, Carmen & Calvo, Guillermo, 2002. "Fear of floating," MPRA Paper 14000, University Library of Munich, Germany.
  3. Jonathan David Ostry & Anne Marie Gulde & Atish R. Ghosh & Holger C. Wolf, 1995. "Does the Nominal Exchange Rate Regime Matter?," IMF Working Papers 95/121, International Monetary Fund.
  4. Craig Burnside & Martin Eichenbaum & Sergio Rebelo, 1998. "Prospective deficits and the Asian currency crisis," Working Paper Series WP-98-5, Federal Reserve Bank of Chicago.
  5. Masson,Paul R. & Taylor,Mark P. (ed.), 1993. "Policy Issues in the Operation of Currency Unions," Cambridge Books, Cambridge University Press, number 9780521434553, April.
  6. Barry Eichengreen., 1993. "International Monetary Arrangements for the 21st Century," Center for International and Development Economics Research (CIDER) Working Papers C93-021, University of California at Berkeley.
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Cited by:
  1. Ahmet Atil Asici, 2010. "Parametric and non-parametric approaches to exits from fixed exchange rate regimes," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 15(4), pages 381-406.
  2. Asici, Ahmet Atil & Ivanova, Nadezhda & Wyplosz, Charles, 2005. "How to Exit from Fixed Exchange Rate Regimes," CEPR Discussion Papers 5141, C.E.P.R. Discussion Papers.
  3. A. Bénassy-Quéré & B. Cœuré, 2002. "The Survival of Intermediate Exchange rate Regimes," THEMA Working Papers 2002-11, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.
  4. Monzur Hossain, 2008. "Currency Regime Choice: A Survey of Empirical Literature," AIUB Bus Econ Working Paper Series AIUB-BUS-ECON-2008-11, American International University-Bangladesh, Office of Research and Publications (ORP), revised Apr 2008.
  5. Demosthenes N. Tambakis, 2007. "Fear of Floating and Social Welfare," International Journal of Central Banking, International Journal of Central Banking, vol. 3(3), pages 183-204, September.
  6. repec:tcd:wpaper:tep8 is not listed on IDEAS
  7. Hossain, Monzur, 2011. "International monetary arrangements for the 21st century--Which way?," Journal of the Japanese and International Economies, Elsevier, vol. 25(2), pages 47-63, June.
  8. Sébastien Wälti, 2005. "The duration of fixed exchange rate regimes," The Institute for International Integration Studies Discussion Paper Series iiisdp96, IIIS.
  9. Bird, Graham & Rowlands, Dane, 2009. "Exchange Rate Regimes in Developing and Emerging Economies and the Incidence of IMF Programs," World Development, Elsevier, vol. 37(12), pages 1839-1848, December.
  10. Juraj Antal & Jan Filáček & Jan Frait & Roman Horvath & Viktor Kotlán & Michal Skořepa, 2009. "Monetary Policy Strategies before Euro Adoption: The Art of Chasing Many Rabbits," Czech Economic Review, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, vol. 3(2), pages 176-198, July.
  11. Klein, Michael W. & Shambaugh, Jay C., 2008. "The dynamics of exchange rate regimes: Fixes, floats, and flips," Journal of International Economics, Elsevier, vol. 75(1), pages 70-92, May.
  12. Sean Barrett, 2005. "Risk Equalisation and Competition in the Irish Health Insurance Market," Trinity Economics Papers 200058, Trinity College Dublin, Department of Economics.
  13. Jan Filácek & Roman Horváth & Michal Skorepa, 2006. "Monetary Policy before Euro Adoption: Challenges for EU New Members," William Davidson Institute Working Papers Series wp853, William Davidson Institute at the University of Michigan.
  14. Michael W. Klein & Jay C. Shambaugh, 2006. "The Nature of Exchange Rate Regimes," NBER Working Papers 12729, National Bureau of Economic Research, Inc.

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