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The Determinants of Exchange Rate Regimes in Emerging Market Economies

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  • Mehmet Guclu

    () (Department of Economics, Ege University)

Abstract

The choice of exchange rate regime has become one of the most important issues one more time in many economies after the financial crises in recent years. In the wake of the financial crises, many countries, especially emerging market economies, opted for floating exchange rate regimes by forsaking the pegged regimes. Consequently, an old debate on the choice and determinants of exchange rate regimes has been triggered. Economists have started to debate what appropriate exchange rate regime for an economy is. When the tendency in recent years is taken into consideration, the choice of exchange rate regime of countries, especially emerging economies, needs to be analyzed. To do this, in this paper, we attempt to uncover how emerging market economies choose their exchange rate regimes. In other words, we try to find the economic and political factors underlying the choice of exchange rate regimes. The study includes 25 emerging market economies over the period 1970-2006. We use random effect ordered probit model in order to find the long run economic and political determinants of exchange rate regimes for emerging economies. The determinants of both the de jure and de facto exchange regimes are empirically analyzed in the paper.

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File URL: http://iibf.ege.edu.tr/economics/papers/wp08-06.pdf
File Function: First version, 2008
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Bibliographic Info

Paper provided by Ege University, Department of Economics in its series Working Papers with number 0806.

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Length: 15 pages
Date of creation: May 2008
Date of revision:
Handle: RePEc:ege:wpaper:0806

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Web page: http://www.iibf.ege.edu.tr/economics/
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Keywords: Exchange Rate Regime; Emerging Market;

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  14. Agnieszka Markiewicz, 2005. "Choice of Exchange Rate Regime in Central and Eastern European Countries: an Empirical Analysis," Center for Economic Studies - Discussion papers ces0501, Katholieke Universiteit Leuven, Centrum voor Economische Studiën.
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