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International monetary arrangements for the 21st century--Which way?

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  • Hossain, Monzur

Abstract

This paper examines some competing views on currency regime choice by applying the dynamic multi-state Markov (MSM) model to the regime transitions of 166 countries from 1980 to 1999. The findings suggest that the bipolar view is valid only in the long run and for a reason quite different from what the proponents had imagined, namely, economic development rather than crisis-driven exits. The estimated steady-state probabilities even predict that a unipolar fixed exchange rate system could emerge in the long run. Despite some divergence, both de jure and de facto regime data corroborate the key findings.

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Bibliographic Info

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

Volume (Year): 25 (2011)
Issue (Month): 2 (June)
Pages: 47-63

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Handle: RePEc:eee:jjieco:v:25:y:2011:i:2:p:47-63

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

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Keywords: The bipolar view Regime transition Crisis Developmental stage Markov model;

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  1. Maurice Obstfeld & Kenneth Rogoff, 1995. "The Mirage of Fixed Exchange Rates," NBER Working Papers 5191, National Bureau of Economic Research, Inc.
  2. Hernandez, Leonardo & Montiel, Peter J., 2003. "Post-crisis exchange rate policy in five Asian countries: Filling in the "hollow middle"?," Journal of the Japanese and International Economies, Elsevier, vol. 17(3), pages 336-369, September.
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  9. Hossain, Monzur, 2009. "Institutional development and the choice of exchange rate regime: A cross-country analysis," Journal of the Japanese and International Economies, Elsevier, vol. 23(1), pages 56-70, March.
  10. Reinhart, Carmen & Calvo, Guillermo, 2002. "Fear of floating," MPRA Paper 14000, University Library of Munich, Germany.
  11. Lawrence H. Summers, 2000. "International Financial Crises: Causes, Prevention, and Cures," American Economic Review, American Economic Association, vol. 90(2), pages 1-16, May.
  12. Hélène Poirson, 2001. "How Do Countries Choose their Exchange Rate Regime?," IMF Working Papers 01/46, International Monetary Fund.
  13. Paolo Mauro & Grace Juhn, 2002. "Long-Run Determinants of Exchange Rate Regimes," IMF Working Papers 02/104, International Monetary Fund.
  14. Obstfeld, Maurice, 1996. "Models of Currency Crises with Self-fulfilling Features," CEPR Discussion Papers 1315, C.E.P.R. Discussion Papers.
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  17. Stanley Fischer, 2001. "Exchange Rate Regimes: Is the Bipolar View Correct?," Journal of Economic Perspectives, American Economic Association, vol. 15(2), pages 3-24, Spring.
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