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Evolution and Performance of Exchange Rate Regimes

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Author Info
Kenneth Rogoff
Ashoka Mody
Nienke Oomes
Robin Brooks
Aasim M. Husain

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Abstract

Using recent advances in the classification of exchange rate regimes, this paper finds no support for the popular bipolar view that countries will tend over time to move to the polar extremes of free float or rigid peg. Rather, intermediate regimes have shown remarkable durability. The analysis suggests that as economies mature, the value of exchange rate flexibility rises. For countries at a relatively early stage of financial development and integration, fixed or relatively rigid regimes appear to offer some anti-inflation credibility gain without compromising growth objectives. As countries develop economically and institutionally, there appear to be considerable benefits to more flexible regimes. For developed countries that are not in a currency union, relatively flexible exchange rate regimes appear to offer higher growth without any cost in credibility.

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Paper provided by International Monetary Fund in its series IMF Working Papers with number 03/243.

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Length: 83 pages
Date of creation: 17 Dec 2003
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Handle: RePEc:imf:imfwpa:03/243

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Keywords: Exchange rate regimes Economic conditions

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  22. Inci Ötker & Rupa Duttagupta, 2003. "Exits From Pegged Regimes: An Empirical Analysis," IMF Working Papers 03/147, International Monetary Fund. [Downloadable!]
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