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International Monetary Arrangements for the 21st Century—Which Way?

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  • Hossain, Monzur

Abstract

This paper examines some competing views on currency regime choice by applying the dynamic multi-state Markov (MSM) model to the regime transitions of 166 countries from 1980 to 1999. The findings suggest that the bipolar view is valid only in the long run and for a reason quite different from what the proponents had imagined, namely, economic development rather than crisis-driven exits. The estimated steady-state probabilities even predict that a unipolar fixed exchange rate system could emerge in the long run. Despite some divergence, both de jure and de facto regime data corroborate the key findings.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 24866.

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Date of creation: 2009
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Handle: RePEc:pra:mprapa:24866

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Keywords: The bipolar view; Regime transition; Crisis; Developmental stage; Markov model;

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  1. Atish R. Ghosh & Anne-Marie Gulde & Jonathan D. Ostry & Holger C. Wolf, 1997. "Does the Nominal Exchange Rate Regime Matter?," NBER Working Papers, National Bureau of Economic Research, Inc 5874, National Bureau of Economic Research, Inc.
  2. Jürgen von Hagen & Jizhong Zhou, 2005. "The choice of exchange rate regime: "An empirical analysis for transition economies" ," The Economics of Transition, The European Bank for Reconstruction and Development, The European Bank for Reconstruction and Development, vol. 13(4), pages 679-703, October.
  3. Masson, Paul R., 2001. "Exchange rate regime transitions," Journal of Development Economics, Elsevier, Elsevier, vol. 64(2), pages 571-586, April.
  4. Maurice Obstfeld & Kenneth Rogoff, 1995. "The mirage of fixed exchange rates," Working Papers in Applied Economic Theory, Federal Reserve Bank of San Francisco 95-08, Federal Reserve Bank of San Francisco.
  5. Guillermo A. Calvo & Carmen M. Reinhart, 2000. "Fear of Floating," NBER Working Papers, National Bureau of Economic Research, Inc 7993, National Bureau of Economic Research, Inc.
  6. Leonardo Hernández & Peter Montiel, 2002. "Post-crisis exchange rate policy in five Asian countries: filling in the 'hollow middle'?," Proceedings, Federal Reserve Bank of San Francisco, Federal Reserve Bank of San Francisco, issue Sep.
  7. Obstfeld, Maurice, 1996. "Models of Currency Crises with Self-fulfilling Features," CEPR Discussion Papers, C.E.P.R. Discussion Papers 1315, C.E.P.R. Discussion Papers.
  8. MASSON, Paul & RUGE-MURCIA, Francisco J., 2003. "Explaining the Transition Between Exchange Rate Regimes," Cahiers de recherche, Universite de Montreal, Departement de sciences economiques 2003-21, Universite de Montreal, Departement de sciences economiques.
  9. Hélène Poirson, 2001. "How Do Countries Choose their Exchange Rate Regime?," IMF Working Papers, International Monetary Fund 01/46, International Monetary Fund.
  10. Baxter, Marianne & Stockman, Alan C., 1989. "Business cycles and the exchange-rate regime : Some international evidence," Journal of Monetary Economics, Elsevier, Elsevier, vol. 23(3), pages 377-400, May.
  11. Paolo Mauro & Grace Juhn, 2002. "Long-Run Determinants of Exchange Rate Regimes," IMF Working Papers, International Monetary Fund 02/104, International Monetary Fund.
  12. Jeffrey A. Frankel, 2003. "Experience of and Lessons from Exchange Rate Regime in Emerging Economies," NBER Working Papers, National Bureau of Economic Research, Inc 10032, National Bureau of Economic Research, Inc.
  13. Lawrence H. Summers, 2000. "International Financial Crises: Causes, Prevention, and Cures," American Economic Review, American Economic Association, American Economic Association, vol. 90(2), pages 1-16, May.
  14. Stanley Fischer, 2001. "Exchange Rate Regimes: Is the Bipolar View Correct?," Journal of Economic Perspectives, American Economic Association, American Economic Association, vol. 15(2), pages 3-24, Spring.
  15. Atish R. Ghosh & Anne-Marie Gulde & Holger C. Wolf, 2003. "Exchange Rate Regimes: Choices and Consequences," MIT Press Books, The MIT Press, The MIT Press, edition 1, volume 1, number 0262072408, December.
  16. Hossain, Monzur, 2009. "Institutional development and the choice of exchange rate regime: A cross-country analysis," Journal of the Japanese and International Economies, Elsevier, Elsevier, vol. 23(1), pages 56-70, March.
  17. Carmen M. Reinhart & Kenneth S. Rogoff, 2004. "The Modern History of Exchange Rate Arrangements: A Reinterpretation," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 119(1), pages 1-48, February.
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