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The Importance of the Exchange Rate Regime in Limiting Misalignment

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  • Dubas, Justin M.
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    Abstract

    Summary This paper explores how the choice of a country's exchange rate regime may affect exchange rate misalignment for developing and developed countries. A measure of misalignment is obtained by using a panel cointegration vector estimator. This paper finds that for developing countries, an intermediate exchange rate regime (a regime falling somewhere between a pure float and a hard peg) is most effective in preventing exchange rate misalignment. Additionally, the choice of an exchange rate regime as a means to limit misalignment matters for developing countries, but does not seem to matter for developed countries.

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    Bibliographic Info

    Article provided by Elsevier in its journal World Development.

    Volume (Year): 37 (2009)
    Issue (Month): 10 (October)
    Pages: 1612-1622

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    Handle: RePEc:eee:wdevel:v:37:y:2009:i:10:p:1612-1622

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    Web page: http://www.elsevier.com/locate/worlddev

    Related research

    Keywords: equilibrium exchange rates exchange rate regime misalignment developing countries;

    References

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    1. G. C. Lim, 2000. "Misalignment and Managed Exchange Rates," IMF Working Papers 00/63, International Monetary Fund.
    2. John Cady, 2003. "The Equilibrium Real Exchange Rate of the Malagasy Franc," IMF Working Papers 03/28, International Monetary Fund.
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    8. Chihwa Kao & Min-Hsien Chiang, 1999. "On the Estimation and Inference of a Cointegrated Regression in Panel Data," Center for Policy Research Working Papers 2, Center for Policy Research, Maxwell School, Syracuse University.
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    Cited by:
    1. You, Kefei & Sarantis, Nicholas, 2012. "A twelve-area model for the equilibrium Chinese Yuan/US dollar nominal exchange rate," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 22(1), pages 151-170.
    2. Issiaka Coulibaly & Blaise Gnimassoun, 2013. "Current account sustainability in Sub-Saharan Africa: Does the exchange rate regime matter?," EconomiX Working Papers 2013-42, University of Paris West - Nanterre la Défense, EconomiX.
    3. Coulibaly, Issiaka & Davis, Junior, 2013. "Exchange rate regimes and economic performance: Does CFA zone membership benefit their economies?," MPRA Paper 54075, University Library of Munich, Germany.
    4. Demir, Firat, 2010. "Exchange Rate Volatility and Employment Growth in Developing Countries: Evidence from Turkey," World Development, Elsevier, vol. 38(8), pages 1127-1140, August.
    5. Blaise Gnimassoun, 2014. "The importance of the exchange rate regime in limiting current account imbalances in sub-Saharan African countries," EconomiX Working Papers 2014-22, University of Paris West - Nanterre la Défense, EconomiX.
    6. Zhang, Zhibai & Chen, Langnan, 2013. "A New Assessment of the Chinese RMB Exchange Rate," MPRA Paper 49315, University Library of Munich, Germany.

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