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How to Exit From Fixed Exchange Rate Regimes?

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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 depegging occur in good macroeconomic conditions - an unnatural move for most policymakers - 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 Economics Section, The Graduate Institute of International Studies in its series IHEID Working Papers with number 03-2005.

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Length: 36
Date of creation: 26 Jun 2005
Date of revision:
Handle: RePEc:gii:giihei:heiwp03-2005

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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. Ahmed Atil Asici, 2008. "Parametric and Non-Parametric Approaches to Exits from Fixed Exchange Rate Regimes," Working Papers 401, Economic Research Forum, revised May 2008.
  2. Kosta Josifidis & Jean-Pierre Allegret & Emilija Beker Pucar, 2009. "Monetary and Exchange Rate Regimes Changes: The Cases of Poland, Czech Republic, Slovakia and Republic of Serbia," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 56(2), pages 199-226, June.
  3. Nadezhda Ivanova, 2007. "Estimation of the Equilibrium Real Exchange Rate in Russia: Trade-Balance Approach," Working Papers w0102, Center for Economic and Financial Research (CEFIR).
  4. Felix Fischer & Charlotte J. Lundgren & Samir Jahjah, 2013. "Making Monetary Policy More Effective: The Case of the Democratic Republic of the Congo," IMF Working Papers 13/226, International Monetary Fund.
  5. Michael W. Klein & Jay C. Shambaugh, 2006. "The Nature of Exchange Rate Regimes," NBER Working Papers 12729, National Bureau of Economic Research, Inc.
  6. 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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