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Institutional development and the choice of exchange rate regime: A cross-country analysis

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  • Hossain, Monzur

Abstract

This paper investigates the choice of exchange rate regime by analyzing both de jure and de facto regime choices for the period 1973-1996. It finds that economic fundamentals, financial and political institutional variables provide relevant guidance for de jure regime choices. However, shocks are found to be the determinants of a de facto regime choice. The analysis shows that only a highly financially liberalized economy can sustain a corner regime. A partial financial liberalization increases the probability of divergence from the de jure regime in the face of various shocks, but an increase in the level of financial reforms decreases the probability of divergence. Moreover, regime choices are influenced by the IMF and regional financial architecture. The political institutions play an important role in the choice of a regime; however, their role varies with the level of financial development. J. Japanese Int. Economies 23 (1) (2009) 56-70.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of the Japanese and International Economies.

Volume (Year): 23 (2009)
Issue (Month): 1 (March)
Pages: 56-70

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Handle: RePEc:eee:jjieco:v:23:y:2009:i:1:p:56-70

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Web page: http://www.elsevier.com/locate/inca/622903

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Keywords: De jure and de facto exchange rate regime Divergence Learning Financial development;

References

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Citations

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Cited by:
  1. Hossain, Monzur, 2013. "Capital Flows to Least Developed Countries: What Matters?," MPRA Paper 51229, University Library of Munich, Germany.
  2. Méon, Pierre-Guillaume & Minne, Geoffrey, 2014. "Mark my words: Information and the fear of declaring an exchange rate regime," Journal of Development Economics, Elsevier, Elsevier, vol. 107(C), pages 244-261.
  3. AsIcI, Ahmet AtIl, 2011. "Exchange rate regime choice and currency crises," Economic Systems, Elsevier, Elsevier, vol. 35(3), pages 419-436, September.
  4. Frank Bohn, 2013. "The Politics of Surprise Devaluations: Modelling Motives for Giving Up a Peg," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), Justus-Liebig University Giessen, Department of Statistics and Economics, Justus-Liebig University Giessen, Department of Statistics and Economics, vol. 233(5-6), pages 562-574, October.
  5. Hossain, Monzur, 2009. "International Monetary Arrangements for the 21st Century—Which Way?," MPRA Paper 24866, University Library of Munich, Germany.
  6. Mohamed Sfia, 2011. "The choice of exchange rate regimes in the MENA countries: a probit analysis," International Economics and Economic Policy, Springer, Springer, vol. 8(3), pages 275-305, September.
  7. Feryel Ouerghi, 2013. "Global Financial Crisis: Did Exchange Rate Politics Help Emerging Countries To Be More Resilient," International Journal of Economics and Financial Issues, Econjournals, Econjournals, vol. 3(4), pages 949 - 963.
  8. Berdiev, Aziz N. & Kim, Yoonbai & Chang, Chun Ping, 2012. "The political economy of exchange rate regimes in developed and developing countries," European Journal of Political Economy, Elsevier, Elsevier, vol. 28(1), pages 38-53.
  9. Pierre-Guillaume Méon & Geoffrey Minne, 2014. "Mark my Words: Information and the Fear of Declaring one’s Exchange Rate Regime," ULB Institutional Repository, ULB -- Universite Libre de Bruxelles 2013/163527, ULB -- Universite Libre de Bruxelles.

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