In recent years, many countries have suffered severe financial crises, producing a staggering toll on their economies, particularly in emerging markets. One view blames fixed exchange rates-- soft pegs'--for these meltdowns. Adherents to that view advise countries to allow their currency to float. We analyze the behavior of exchange rates, reserves, the monetary aggregates, interest rates, and commodity prices across 154 exchange rate arrangements to assess whether official labels' provide an adequate representation of actual country practice. We find that, countries that say they allow their exchange rate to float mostly do not--there seems to be an epidemic case of fear of floating.' Since countries that are classified as having a free or a managed float mostly resemble noncredible pegs--the so-called demise of fixed exchange rates' is a myth--the fear of floating is pervasive, even among some of the developed countries. We present an analytical framework that helps to understand why there is fear of floating.
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number
7993.
Length: Date of creation: Nov 2000 Date of revision: Handle: RePEc:nbr:nberwo:7993
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Reinhart, Carmen & Calvo, Guillermo, 2002.
"Fear of floating,"
MPRA Paper
14000, University Library of Munich, Germany.
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Find related papers by JEL classification: F31 - International Economics - - International Finance - - - Foreign Exchange F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
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References listed on IDEAS Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
Michael Gavin & Roberto Perotti, 1997.
"Fiscal Policy in Latin America,"
NBER Chapters,
in: NBER Macroeconomics Annual 1997, Volume 12, pages 11-72
National Bureau of Economic Research, Inc.
[Downloadable!]
Atish R. Ghosh & Anne-Marie Gulde & Jonathan D. Ostry & Holger C. Wolf, 1997.
"Does The Nominal Exchange Rate Regime Matter?,"
Working Papers
97-09, New York University, Leonard N. Stern School of Business, Department of Economics.
Other versions:
Guillermo A. Calvo & Carmen M. Reinhart, 2000.
"Fixing for Your Life,"
NBER Working Papers
8006, National Bureau of Economic Research, Inc.
[Downloadable!] (restricted)
Other versions:
Reinhart, Carmen & Calvo, Guillermo, 2001.
"Fixing for your life,"
MPRA Paper
13873, University Library of Munich, Germany.
[Downloadable!]
Cited by: (explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.) This item has more than 25 citations. To prevent cluttering this page, these citations are listed on a separate page.