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Evolution and Performance of Exchange Rate Regimes

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

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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Bibliographic Info

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

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Length: 84
Date of creation: 01 Dec 2003
Date of revision:
Handle: RePEc:imf:imfwpa:03/243

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Keywords: Exchange rate regimes; Economic conditions; exchange rate; inflation; exchange rate regime; exchange rates; exchange rate flexibility; inflation performance; terms of trade; foreign exchange; lower inflation; monetary policy; exchange rate volatility; macroeconomic performance; real exchange rate; inflation targeting; money growth; flexible exchange rate; high inflation; annual inflation; flexible exchange rates; fixed exchange rate; foreign exchange markets; dual exchange rates; real exchange rates; flexible exchange rate regimes; exchange markets; exchange rate regime classification; inflation rates; real exchange rate volatility; floating exchange rates; foreign currency; exchange rate policy; exchange arrangements; exchange rate rigidity; exchange rate pegs; fixed exchange rate regimes; terms of trade shocks; fixed exchange rates; currency unions; exchange rate movements; exchange rate arrangements; rigid exchange rate regimes; exchange rate system; nominal exchange rate; floating exchange rate; alternative exchange rate; inflation rate; foreign exchange reserves; exchange rate systems; market exchange rates; exchange rate variability; multiple exchange rates; inflationary expectations; exchange rate policies; exchange reserves; money supply; classification of exchange rate; natural exchange rate; rate of inflation; real interest rates; exchange rate depreciation; exchange rate data; de facto exchange rate regime; currency values; exchange rate change; post-crisis period; currency boards; official exchange rate; alternative exchange rate regimes; exchange restrictions; variable inflation; de facto exchange rate regimes; average inflation; exchange rate stability; monetary economics; exchange rate changes; stable exchange rates; black market; floating exchange rate regime; parallel exchange rate; price inflation; exchange rate behavior; exchange rate target; exchange rate band; flexible exchange rate system; currency areas; currency convertibility; effective exchange rate; low inflation; fixed exchange rate regime; alternative exchange rate regime; exchange rate path; floating exchange rate regimes; inflation growth; flexible exchange rate regime; exchange rate regime classifications; macroeconomic stability; explicit exchange rate; exchange controls; inflation target; exchange rate choice; freely floating exchange rate; real rates; independent central bank; exchange rate unification; average inflation rate; intermediate exchange rate; annual inflation rate; exchange rate arrangement; bilateral exchange rate; history of exchange rate; exchange rate information; exchange rate pass; exchange rate guarantee; real effective exchange rate; exchange rate crises; basket of currencies; exchange rate choices;

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References

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