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Exchange Rate Regime Transitions

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Author Info

  • Paul R. Masson

Abstract

The “hollowing-out,” or “two poles” hypothesis is tested in the context of a Markov chain model of exchange rate transitions. In particular, two versions of the hypothesis—that hard pegs are an absorbing state, or that fixes and floats form a closed set, with no transitions to intermediate regimes—are tested using two alternative classifications of regimes. While there is some support for the lack of exits from hard pegs (i.e., that they are an absorbing state), the data generally indicate that the intermediate cases will continue to constitute a sizable proportion of actual exchange rate regimes.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 00/134.

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Length: 17
Date of creation: 01 Jul 2000
Date of revision:
Handle: RePEc:imf:imfwpa:00/134

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Keywords: Exchange rate regimes; Floating exchange rates; Currency pegs; exchange rate; probability; probabilities; exchange rate regime; exchange rates; currency boards; markov chain; statistic; intermediate exchange rate; exchange rate commitments; intermediate exchange rate regimes; exchange rate fluctuations; markov chains; foreign exchange market; statistics; nominal exchange rate; foreign exchange; financial statistics; stochastic process; samples; exchange restrictions; stochastic processes; significance level; exchange rate volatility; adjustable exchange rates; exchange rate pegs; exchange rate mechanism; fluctuations in exchange rates; frequency distribution; exchange rate behavior; explicit exchange rate; exchange rate targets; hypothesis testing; cluster analysis; exchange rate stability; exchange rate changes; exchange arrangements; exchange market intervention; equation; exchange rate commitment; surveys; standard deviation; empirical exercise; exchange rate arrangements; real exchange rate; markov process; currency convertibility; intermediate exchange rate regime; probability theory;

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  1. 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.
  2. Klein, Michael W. & Marion, Nancy P., 1997. "Explaining the duration of exchange-rate pegs," Journal of Development Economics, Elsevier, vol. 54(2), pages 387-404, December.
  3. Maurice Obstfeld & Kenneth Rogoff, 1995. "The Mirage of Fixed Exchange Rates," NBER Working Papers 5191, National Bureau of Economic Research, Inc.
  4. Robert P. Flood & Jagdeep S. Bhandari & Jocelyn P. Horne, 1989. "Evolution of Exchange Rate Regimes," IMF Staff Papers, Palgrave Macmillan, vol. 36(4), pages 810-835, December.
  5. 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.
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