IMF Support and Inter-Regime Exchange Rate Volatility
AbstractA widely held notion is that freely floating exchange rates are excessively volatile when moving from fixed to floating exchange rates. We re-examine the data and conclude that the disparity between the fundamentals and exchange rate volatility is more apparent than real, especially when the Deutsche Mark, rather than the dollar, is chosen as the numeraire currency. We argue and demonstrate that in inter-regime comparisons one has to account for certain âmissing variablesâ which compensate for the fundamental variablesâ volatility under fixed exchange rates. We show that IMF credit support is a crucial compensating variable.
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Bibliographic InfoArticle provided by Springer in its journal Open Economies Review.
Volume (Year): 23 (2012)
Issue (Month): 1 (February)
Contact details of provider:
Web page: http://www.springerlink.com/link.asp?id=100323
Exchange rates; Exchange rate regimes; Excess volatility; IMF credit; F31;
Other versions of this item:
- Ivo J.M. Arnold & Ronald MacDonald & Casper G. de Vries, 2007. "IMF Support and Inter-regime Exchange rate Volatility," Working Papers 2007_37, Business School - Economics, University of Glasgow.
- F31 - International Economics - - International Finance - - - Foreign Exchange
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