Advanced Search
MyIDEAS: Login

Could The Exchange Rate Regime Reduce Macroeconomic Volatility?

Contents:

Author Info

  • Diego Bastourre
  • Jorge Carrera

Abstract

This study intends to determine the kind of relationship existing between the exchange rate regime and real volatility. After carefully revising theoretical and empirical results of previous research, a new methodology is proposed that corrects deficiencies found in previous empirical papers. The results show non-neutrality of the exchange rate regime. Particularly, it is found that the more rigid the regime, the greater the real volatility. Even when a classification of the exchange rate regime is performed allowing a comparison between consistent pegging and consistent floating, the former has a higher volatility. Countries with "fear of floating" or "inability of pegging" behavior exhibit lower volatility than consistent pegs.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.anpec.org.br/encontro2004/artigos/A04A067.pdf
Download Restriction: no

Bibliographic Info

Paper provided by ANPEC - Associação Nacional dos Centros de Pósgraduação em Economia [Brazilian Association of Graduate Programs in Economics] in its series Anais do XXXII Encontro Nacional de Economia [Proceedings of the 32th Brazilian Economics Meeting] with number 067.

as in new window
Length:
Date of creation: 2004
Date of revision:
Handle: RePEc:anp:en2004:067

Contact details of provider:
Postal: Secretaria da ANPEC Rua Tiradentes, 17 - Ingá Niterói, RJ 24210-510 Brazil
Phone: 55 21 2709 7154
Fax: 55-11-3091-6073
Email:
Web page: http://www.anpec.org.br
More information through EDIRC

Order Information:
Postal: Secretaria da ANPEC Rua Tiradentes, 17 - Ingá Niterói, RJ 24210-510 Brazil

Related research

Keywords:

Other versions of this item:

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Poole, William, 1970. "Optimal Choice of Monetary Policy Instruments in a Simple Stochastic Macro Model," The Quarterly Journal of Economics, MIT Press, vol. 84(2), pages 197-216, May.
  2. Sebastian Edwards, 2001. "Dollarization and Economic Performance: An Empirical Investigation," NBER Working Papers 8274, National Bureau of Economic Research, Inc.
  3. Fabrice Collard & Harris Dellas, 2006. "Price Rigidity and the Selection of the Exchange Rate Regime," Open Economies Review, Springer, vol. 17(1), pages 5-26, January.
  4. Susanto Basu & Alan M. Taylor, 1999. "Business Cycles in International Historical Perspective," Journal of Economic Perspectives, American Economic Association, vol. 13(2), pages 45-68, Spring.
  5. Arellano, Manuel & Bond, Stephen, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Wiley Blackwell, vol. 58(2), pages 277-97, April.
  6. Alberto Alesina & Alexander F. Wagner, 2006. "Choosing (and Reneging on) Exchange Rate Regimes," Journal of the European Economic Association, MIT Press, vol. 4(4), pages 770-799, 06.
  7. Lucas, Robert Jr., 1982. "Interest rates and currency prices in a two-country world," Journal of Monetary Economics, Elsevier, vol. 10(3), pages 335-359.
  8. Sebastian Edwards, 1996. "The Determinants of the Choice between Fixed and Flexible Exchange-Rate Regimes," NBER Working Papers 5756, National Bureau of Economic Research, Inc.
  9. Agenor, Pierre-Richard & McDermott, C John & Prasad, Eswar S, 2000. "Macroeconomic Fluctuations in Developing Countries: Some Stylized Facts," World Bank Economic Review, World Bank Group, vol. 14(2), pages 251-85, May.
  10. Jonathan David Ostry & Anne Marie Gulde & Atish R. Ghosh & Holger C. Wolf, 1995. "Does the Nominal Exchange Rate Regime Matter?," IMF Working Papers 95/121, International Monetary Fund.
  11. Garey Ramey & Valerie A. Ramey, 1994. "Cross-Country Evidence on the Link Between Volatility and Growth," NBER Working Papers 4959, National Bureau of Economic Research, Inc.
  12. Sebastian Edwards, 2001. "Exchange Rate Regimes, Capital Flows and Crisis Prevention," NBER Working Papers 8529, National Bureau of Economic Research, Inc.
  13. Denizer, Cevdet & Iyigun, Murat F. & Owen, Ann L., 2000. "Finance and macroeconomic volatility," Policy Research Working Paper Series 2487, The World Bank.
  14. Maurice Obstfeld & Kenneth Rogoff, 2000. "New Directions for Stochastic Open Economy Models," International Finance 0004002, EconWPA.
  15. Maurice Obstfeld & Kenneth Rogoff, 1994. "Exchange Rate Dynamics Redux," NBER Working Papers 4693, National Bureau of Economic Research, Inc.
  16. Sebastian Edwards & Miguel A. Savastano, 1999. "Exchange Rates in Emerging Economies: What Do We Know? What Do We Need to Know?," NBER Working Papers 7228, National Bureau of Economic Research, Inc.
  17. Michael B. Devereux & Charles Engel, 2001. "The Optimal Choice of Exchange Rate Regime: Price-Setting Rules and Internationalized Production," NBER Chapters, in: Topics in Empirical International Economics: A Festschrift in Honor of Robert E. Lipsey, pages 163-194 National Bureau of Economic Research, Inc.
  18. Pritchett, Lant, 1998. "Patterns of economic growth : hills, plateaus, mountains, and plains," Policy Research Working Paper Series 1947, The World Bank.
  19. Sebastian Edwards, 1992. "Exchange Rates as Nominal Anchors," NBER Working Papers 4246, National Bureau of Economic Research, Inc.
  20. Baxter, M. & Stockman, A.C., 1988. "Business Cycles And The Exchange Rate System: Some International Evidence," RCER Working Papers 140, University of Rochester - Center for Economic Research (RCER).
  21. Lane, Philip R., 2001. "The new open economy macroeconomics: a survey," Journal of International Economics, Elsevier, vol. 54(2), pages 235-266, August.
  22. Flood, Robert P & Rose, Andrew K, 1993. "Fixing Exchange Rates: A Virtual Quest for Fundamentals," CEPR Discussion Papers 838, C.E.P.R. Discussion Papers.
  23. Boyer, Russell S, 1978. "Optimal Foreign Exchange Market Intervention," Journal of Political Economy, University of Chicago Press, vol. 86(6), pages 1045-55, December.
  24. Ricardo Hausmann & Michael Gavin, 1996. "Securing Stability and Growth in a Shock Prone Region: The Policy Challenge for Latin America," IDB Publications 5919, Inter-American Development Bank.
  25. Turnovsky, Stephen J, 1976. "The Relative Stability of Alternative Exchange Rate Systems in the Presence of Random Disturbances," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 8(1), pages 29-50, February.
  26. Baxter, Marianne & Stockman, Alan C., 1989. "Business cycles and the exchange-rate regime : Some international evidence," Journal of Monetary Economics, Elsevier, vol. 23(3), pages 377-400, May.
  27. Flood, Robert P, 1979. "Capital Mobility and the Choice of Exchange Rate System," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 20(2), pages 405-16, June.
  28. Barry Eichengreen., 1993. "International Monetary Arrangements for the 21st Century," Center for International and Development Economics Research (CIDER) Working Papers C93-021, University of California at Berkeley.
  29. Jeffrey A. Frankel, 1993. "Monetary regime choices for a semi-open country," Pacific Basin Working Paper Series 93-02, Federal Reserve Bank of San Francisco.
  30. Weber, Warren E, 1981. "Output Variability under Monetary Policy and Exchange Rate Rules," Journal of Political Economy, University of Chicago Press, vol. 89(4), pages 733-51, August.
  31. Eduardo Levy-Yeyati & Federico Sturzenegger, 2003. "To Float or to Fix: Evidence on the Impact of Exchange Rate Regimes on Growth," American Economic Review, American Economic Association, vol. 93(4), pages 1173-1193, September.
  32. Levy-Yeyati, Eduardo & Sturzenegger, Federico, 2005. "Classifying exchange rate regimes: Deeds vs. words," European Economic Review, Elsevier, vol. 49(6), pages 1603-1635, August.
  33. Jeffrey A. Frankel, 1999. "No Single Currency Regime is Right for All Countries or At All Times," NBER Working Papers 7338, National Bureau of Economic Research, Inc.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Diego Bastourre & Jorge Carrera & Javier Ibarlucia, 2007. "Commodity Prices In Argentina: What Does Move The Wind?," Anais do XXXV Encontro Nacional de Economia [Proceedings of the 35th Brazilian Economics Meeting] 076, ANPEC - Associação Nacional dos Centros de Pósgraduação em Economia [Brazilian Association of Graduate Programs in Economics].
  2. Klomp, Jeroen & de Haan, Jakob, 2009. "Political institutions and economic volatility," European Journal of Political Economy, Elsevier, vol. 25(3), pages 311-326, September.
  3. Saadet Kasman & Duygu Ayhan, 2006. "Macroeconomic Volatility under Alternative Exchange Rate Regimes in Turkey," Central Bank Review, Research and Monetary Policy Department, Central Bank of the Republic of Turkey, vol. 6(2), pages 37-58.
  4. Morales-Zumaquero, Amalia & Sosvilla-Rivero, Simon, 2010. "Structural breaks in volatility: Evidence for the OECD and non-OECD real exchange rates," Journal of International Money and Finance, Elsevier, vol. 29(1), pages 139-168, February.
  5. Diego Bastourre & Jorge Carrera & Javier Ibarlucia, 2008. "Commodity Prices in Argentina: What Moves the Wind?," Ensayos Económicos, Central Bank of Argentina, Economic Research Department, vol. 1(51), pages 43-81, April - S.
  6. Petreski, Marjan, 2009. "Analysis of exchange-rate regime effect on growth: theoretical channels and empirical evidence with panel data," Economics Discussion Papers 2009-49, Kiel Institute for the World Economy.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:anp:en2004:067. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Hugo E. A. da Gama Cerqueira).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.