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The Performance of Exchange Rate Regimes in Developing Countries - Does the Classifications Scheme Matter?

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  • Michael Bleaney,
  • Manuela Francisco

Abstract

Official and four alternative regime classification schemes based on observed exchange rate behaviour are used to examine the relationship with inflation and growth in developing countries. For an identical sample of observations from 73 countries for 1984-2001, only the scheme based on parallel rates suggests a significant effect (negative) of floating on growth. Floats that claim to be pegs, or have high exchange rate volatility, are the ones with lower growth. Hard pegs offer inflation benefits. Floating is not consistently associated with higher inflation than soft pegs, and any apparent association is a possible by-product of the design of the classification algorithms.

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Bibliographic Info

Paper provided by University of Nottingham, CREDIT in its series Discussion Papers with number 07/04.

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Handle: RePEc:not:notcre:07/04

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Postal: School of Economics University of Nottingham University Park Nottingham NG7 2RD
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Web page: http://www.nottingham.ac.uk/economics/
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Keywords: exchange rate regimes; growth; inflation;

References

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  1. Michael Bleaney & Manuela Francisco, 2005. "Exchange rate regimes and inflation: only hard pegs make a difference," Canadian Journal of Economics, Canadian Economics Association, vol. 38(4), pages 1453-1471, November.
  2. Alberto Alesina & Alexander F. Wagner, 2006. "Choosing (and Reneging on) Exchange Rate Regimes," Journal of the European Economic Association, MIT Press, vol. 4(4), pages 770-799, 06.
  3. Broda, Christian, 2004. "Terms of trade and exchange rate regimes in developing countries," Journal of International Economics, Elsevier, vol. 63(1), pages 31-58, May.
  4. Levy-Yeyati, Eduardo & Sturzenegger, Federico, 2005. "Classifying exchange rate regimes: Deeds vs. words," European Economic Review, Elsevier, vol. 49(6), pages 1603-1635, August.
  5. Jay C. Shambaugh, 2004. "The Effect of Fixed Exchange Rates on Monetary Policy," The Quarterly Journal of Economics, MIT Press, vol. 119(1), pages 300-351, February.
  6. repec:rus:hseeco:181565 is not listed on IDEAS
  7. Carmen M. Reinhart & Kenneth S. Rogoff, 2002. "The Modern History of Exchange Rate Arrangements: A Reinterpretation," NBER Working Papers 8963, National Bureau of Economic Research, Inc.
  8. Eduardo Levy-Yeyati & Federico Sturzenegger, 2003. "To Float or to Fix: Evidence on the Impact of Exchange Rate Regimes on Growth," American Economic Review, American Economic Association, vol. 93(4), pages 1173-1193, September.
  9. Husain, Aasim M. & Mody, Ashoka & Rogoff, Kenneth S., 2005. "Exchange rate regime durability and performance in developing versus advanced economies," Journal of Monetary Economics, Elsevier, vol. 52(1), pages 35-64, January.
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Cited by:
  1. Hiroyuki Yamada & Gerwin Bell, 2012. "Why Did Southeastern European Countries Experience Low Inflation Rates in the Beginning of This Century?," European Journal of Comparative Economics, Cattaneo University (LIUC), vol. 9(2), pages 229-246, August.
  2. Michael Bleaney, & Manuela Francisco, . "Classifying Exchange Rate Regimes: A Statistical Analysis of Alternative Methods," Discussion Papers 07/05, University of Nottingham, CREDIT.
  3. Michael Bleaney & Manuela Francisco, 2007. "Classifying exchange rate regimes: a statistical analysis of alternative methods," Economics Bulletin, AccessEcon, vol. 6(3), pages 1-16.
  4. nnamdi, Kelechi & ifionu, Ebele, 2013. "Exchange rate volatility and exchange rate uncertainty in Nigeria: a financial econometric analysis (1970- 2012)," MPRA Paper 48316, University Library of Munich, Germany, revised 2013.

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