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Currency Regime Choice: A Survey of Empirical Literature

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  • Monzur Hossain

    ()
    (American Internationla University-Bangladesh(AIUB))

Abstract

This paper reviews the empirical literature on the choice of exchange rate regime. Prominent issues include: (i) the choice based on fundamentals, shocks, financial structure, and political ideology; (ii) the “bipolar view” or “hollowing out hypothesis” and its validity; (iii) regime choice in emerging economies, and (iv) the discrepancy between declared and actual regime, and its consequence on the analysis of currency regime choice. Although much has been learned in each approach, this survey highlights the areas of research in which our understanding of exchange rate regime transition is still incomplete. Observed data rejects the validity of the bipolar view. Moreover, it is seen that a substantial amount of countries diverge from their de jure regime without declaration, which needs to be taken into account for drawing a valid conclusion on the choice of a regime. From the survey it may be concluded that no empirical regularities regarding the choice of a currency regime have emerged yet.

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Bibliographic Info

Paper provided by American International University-Bangladesh, Office of Research and Publications (ORP) in its series AIUB Bus Econ Working Paper Series with number AIUB-BUS-ECON-2008-11.

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Length: 22
Date of creation: Apr 2008
Date of revision: Apr 2008
Handle: RePEc:aiu:abewps:45

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Web page: http://orp.aiub.edu/

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  1. Jeffrey A. Frankel, 2003. "Experience of and Lessons from Exchange Rate Regime in Emerging Economies," NBER Working Papers 10032, National Bureau of Economic Research, Inc.
  2. Melvin, Michael, 1985. "The Choice of an Exchange Rate System and Macroeconomic Stability," Journal of Money, Credit and Banking, Blackwell Publishing, Blackwell Publishing, vol. 17(4), pages 467-78, November.
  3. Poole, William, 1970. "Optimal Choice of Monetary Policy Instruments in a Simple Stochastic Macro Model," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 84(2), pages 197-216, May.
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  5. Leonardo Hernández & Peter J. Montiel, 2002. "Post-crisis exchange rate policy in five Asian countries: filling in the "hollow middle"?," Pacific Basin Working Paper Series, Federal Reserve Bank of San Francisco 2002-07, Federal Reserve Bank of San Francisco.
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  7. Reinhart, Carmen & Rogoff, Kenneth, 2004. "The modern history of exchange rate arrangements: A reinterpretation," MPRA Paper 14070, University Library of Munich, Germany.
  8. Hans Genberg & Alexander K. Swoboda, 2004. "Exchange-Rate Regimes: "Does What Countries Say Matter?"," IHEID Working Papers, Economics Section, The Graduate Institute of International Studies 07-2004, Economics Section, The Graduate Institute of International Studies.
  9. Paul R. Masson, 2000. "Exchange Rate Regime Transitions," IMF Working Papers 00/134, International Monetary Fund.
  10. von Hagen, Jürgen & Zhou, Jizhong, 2002. "The choice of exchange rate regimes: An empirical analysis for transition economies," ZEI Working Papers B 03-2002, ZEI - Center for European Integration Studies, University of Bonn.
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  14. Alberto Alesina & Alexander Wagner, 2003. "Choosing (and reneging on) exchange rate regimes," NBER Working Papers 9809, National Bureau of Economic Research, Inc.
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  16. Lawrence H. Summers, 2000. "International Financial Crises: Causes, Prevention, and Cures," American Economic Review, American Economic Association, American Economic Association, vol. 90(2), pages 1-16, May.
  17. Baxter, Marianne & Stockman, Alan C., 1989. "Business cycles and the exchange-rate regime : Some international evidence," Journal of Monetary Economics, Elsevier, Elsevier, vol. 23(3), pages 377-400, May.
  18. Krugman, Paul, 1979. "A Model of Balance-of-Payments Crises," Journal of Money, Credit and Banking, Blackwell Publishing, Blackwell Publishing, vol. 11(3), pages 311-25, August.
  19. Savvides, Andreas, 1990. "Real exchange rate variability and the choice of exchange rate regime by developing countries," Journal of International Money and Finance, Elsevier, Elsevier, vol. 9(4), pages 440-454, December.
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  22. Roubini, Nouriel & Sachs, Jeffrey D., 1989. "Political and economic determinants of budget deficits in the industrial democracies," European Economic Review, Elsevier, Elsevier, vol. 33(5), pages 903-933, May.
  23. Salant, Stephen W & Henderson, Dale W, 1978. "Market Anticipations of Government Policies and the Price of Gold," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 86(4), pages 627-48, August.
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