Exchange Rate Regime Choice and Country Characteristics: an Empirical Investigation into the Role of Openness
AbstractIn choosing an exchange rate regime for a small open economy, the common wisdom (Friedman (1953), Meade (1950)) calls for a Â°oating regime to outperform a peg because of the ability of the former to cope with relative price changes without major output effects. With balance sheet effects in mind, doubts have been raised about it, though. I test for this, using a near VAR approach. The 32 country sample for the period 1980-2001 was split according to the degree of openness of the economy. The results show that for relatively open economies the common wisdom holds; on the contrary, for relatively closed economies it does not. In fact, the evidence documents that to absorb real shock, fixed exchange rate regimes perform better for relatively closed economies, while flexible exchange rate regimes do a better job for relatively open economies.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by University of Oregon Economics Department in its series University of Oregon Economics Department Working Papers with number 2004-15.
Date of creation: 01 May 2002
Date of revision: 20 Oct 2004
Contact details of provider:
Postal: 1285 University of Oregon, 435 PLC, Eugene, OR 97403-1285
Phone: (541) 346-4661
Fax: (541) 346-1243
Web page: http://economics.uoregon.edu/
More information through EDIRC
Exchange Rate Regimes; Openness; near VAR;
Find related papers by JEL classification:
- E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
- E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
- F34 - International Economics - - International Finance - - - International Lending and Debt Problems
- F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
You can help add them by filling out this form.
reading list or among the top items on IDEAS.Access and download statisticsgeneral information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Bill Harbaugh).
If references are entirely missing, you can add them using this form.