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How to Exit from Fixed Exchange Rate Regimes

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  • Asici, Ahmet Atil
  • Ivanova, Nadezhda
  • Wyplosz, Charles

Abstract

This paper improves upon the recently developed literature on exits from fixed exchange rate regimes in three ways: 1) It allows for two indicators for post-exit macroeconomic conditions, the change in the exchange rate and the change in the output gap; 2) it tests whether the distinction between orderly and disorderly exit is statistically justified, and concludes that it is not; 3) it deals with the sample selection problem. The results, subject to extensive sensitivity analysis, suggest that post-exits are better when de-pegging occur in good macroeconomic conditions – an unnatural move for most policy-makers – when world interest rates decline and in the presence of capital controls. Importantly, ‘good’ macroeconomic policies do not seem to help with post-exit performance.

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Bibliographic Info

Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 5141.

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Date of creation: Jul 2005
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Handle: RePEc:cpr:ceprdp:5141

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Keywords: exchange rate regimes; macroeconomic policy;

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References

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Citations

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Cited by:
  1. Ahmet Atil Asici, 2007. "Parametric and Non-parametric Approaches to Exits from Fixed Exchange Rate Regimes," IHEID Working Papers 14-2007, Economics Section, The Graduate Institute of International Studies.
  2. Michael W. Klein & Jay C. Shambaugh, 2006. "The Nature of Exchange Rate Regimes," NBER Working Papers 12729, National Bureau of Economic Research, Inc.
  3. Klein, Michael W. & Shambaugh, Jay C., 2008. "The dynamics of exchange rate regimes: Fixes, floats, and flips," Journal of International Economics, Elsevier, vol. 75(1), pages 70-92, May.

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