IDEAS home Printed from
MyIDEAS: Login to save this article or follow this journal

The choice of exchange rate regime: "An empirical analysis for transition economies"

  • Jürgen von Hagen
  • Jizhong Zhou

We analyze the choice of exchange rate regimes of the 25 transition economies in Europe and the CIS after 1990. The empirical results show that the traditional Optimum Currency Area considerations provide relevant guidance for the regime choices in these countries. Moreover, regime choices are influenced by inflation rates, cumulative inflation differentials, and international reserves sufficiency. That is, macroeconomic stabilization and the ability to commit to exchange rate pegs also play important roles. Large government deficits have ambiguous effects; they increase the likelihood of moving from flexible to intermediate regimes as well as that of moving from fixed to intermediate ones. Copyright (c) The European Bank for Reconstruction and Development, 2005.

If 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.

File URL:
File Function: link to full text
Download Restriction: Access to full text is restricted to subscribers.

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Article provided by The European Bank for Reconstruction and Development in its journal Economics of Transition.

Volume (Year): 13 (2005)
Issue (Month): 4 (October)
Pages: 679-703

in new window

Handle: RePEc:bla:etrans:v:13:y:2005:i:4:p:679-703
Contact details of provider: Postal: One Exchange Square, London EC2A 2JN
Web page:

More information through EDIRC

Order Information: Web:

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.:

as in new window
  1. 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.
  2. Stephen W. Salant & Dale W. Henderson, 1976. "Market anticipations, government policy, and the price of gold," International Finance Discussion Papers 81, Board of Governors of the Federal Reserve System (U.S.).
  3. Guillermo A. Calvo & Carmen M. Reinhart, 2002. "Fear Of Floating," The Quarterly Journal of Economics, MIT Press, vol. 117(2), pages 379-408, May.
  4. Dreyer, Jacob S., 1978. "Determinants of exchange-rate regimes for currencies of developing countries: Some preliminary results," World Development, Elsevier, vol. 6(4), pages 437-445, April.
  5. Maurice Obstfeld, 1995. "Models of Currency Crises with Self-Fulfilling Features," NBER Working Papers 5285, National Bureau of Economic Research, Inc.
  6. Maurice Obstfeld & Kenneth Rogoff, 1995. "The mirage of fixed exchange rates," Working Papers in Applied Economic Theory 95-08, Federal Reserve Bank of San Francisco.
  7. Sebastian Edwards, 1996. "The Determinants of the Choice between Fixed and Flexible Exchange-Rate Regimes," NBER Working Papers 5756, National Bureau of Economic Research, Inc.
  8. Helge Berger & Jan-Egbert Sturm & Jakob de Haan, 2000. "An Empirical Investigation into Exchange Rate Regime Choice and Exchange Rate Volatility," CESifo Working Paper Series 263, CESifo Group Munich.
  9. McKinnon, Ronald I, 1981. "The Exchange Rate and Macroeconomic Policy: Changing Postwar Perceptions," Journal of Economic Literature, American Economic Association, vol. 19(2), pages 531-57, June.
  10. Krugman, Paul, 1979. "A Model of Balance-of-Payments Crises," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 11(3), pages 311-25, August.
  11. Savvides, Andreas, 1990. "Real exchange rate variability and the choice of exchange rate regime by developing countries," Journal of International Money and Finance, Elsevier, vol. 9(4), pages 440-454, December.
  12. Salant, Stephen W & Henderson, Dale W, 1978. "Market Anticipations of Government Policies and the Price of Gold," Journal of Political Economy, University of Chicago Press, vol. 86(4), pages 627-48, August.
  13. Hélène Poirson, 2001. "How Do Countries Choose their Exchange Rate Regime?," IMF Working Papers 01/46, International Monetary Fund.
  14. Stanley Fischer, 2001. "Exchange Rate Regimes: Is the Bipolar View Correct?," Journal of Economic Perspectives, American Economic Association, vol. 15(2), pages 3-24, Spring.
  15. Rizzo, Jean-Marc, 1998. "The economic determinants of the choice of an exchange rate regime: a probit analysis," Economics Letters, Elsevier, vol. 59(3), pages 283-287, June.
  16. Bruno, M., 1991. "High Inflation and the Nominal Anchors of an Open Economy," Princeton Studies in International Economics 183, International Economics Section, Departement of Economics Princeton University,.
  17. Heller, H Robert, 1978. "Determinants of Exchange Rate Practices," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 10(3), pages 308-21, August.
  18. Dale W. Henderson, 1979. "Financial policies in open economies," International Finance Discussion Papers 133, Board of Governors of the Federal Reserve System (U.S.).
  19. Holden, Paul & Holden, Merle & Suss, Esther C, 1979. "The Determinants of Exchange Rate Flexibility: An Empirical Investigation," The Review of Economics and Statistics, MIT Press, vol. 61(3), pages 327-33, August.
  20. Bernhard, William & Leblang, David, 1999. "Democratic Institutions and Exchange-rate Commitments," International Organization, Cambridge University Press, vol. 53(01), pages 71-97, December.
  21. William Poole, 1969. "Optimal choice of monetary policy instruments in a simple stochastic macro model," Special Studies Papers 2, Board of Governors of the Federal Reserve System (U.S.).
  22. Maurice Obstfeld, 1994. "The Logic of Currency Crises," NBER Working Papers 4640, National Bureau of Economic Research, Inc.
  23. Fratianni, Michele & von Hagen, Juergen, 1990. "The European Monetary System ten years after," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 32(1), pages 173-241, January.
  24. Ricardo Hausmann & Michael Gavin & Carmen Pagés-Serra & Ernesto H. Stein, 1999. "Financial Turmoil and Choice of Exchange Rate Regime," Research Department Publications 4170, Inter-American Development Bank, Research Department.
  25. Levy-Yeyati, Eduardo & Sturzenegger, Federico, 2005. "Classifying exchange rate regimes: Deeds vs. words," European Economic Review, Elsevier, vol. 49(6), pages 1603-1635, August.
  26. Boyer, Russell S, 1978. "Optimal Foreign Exchange Market Intervention," Journal of Political Economy, University of Chicago Press, vol. 86(6), pages 1045-55, December.
  27. von Hagen, Jurgen, 1992. "Policy-Delegation and Fixed Exchange Rates," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 33(4), pages 849-70, November.
  28. Ricardo Hausmann & Michael Gavin & Carmen Pagés & Ernesto H. Stein, 1999. "Financial Turmoil and the Choice of Exchange Rate Regime," IDB Publications (Working Papers) 4128, Inter-American Development Bank.
  29. Barry Eichengreen., 1993. "International Monetary Arrangements for the 21st Century," Center for International and Development Economics Research (CIDER) Working Papers C93-021, University of California at Berkeley.
  30. Richard Meese & Andrew K. Rose, 1996. "Exchange rate instability: determinants and predictability," Proceedings, Federal Reserve Bank of San Francisco, pages 183-205.
  31. Melvin, Michael, 1985. "The Choice of an Exchange Rate System and Macroeconomic Stability," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 17(4), pages 467-78, November.
  32. Amemiya, Takeshi, 1981. "Qualitative Response Models: A Survey," Journal of Economic Literature, American Economic Association, vol. 19(4), pages 1483-1536, December.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:bla:etrans:v:13:y:2005:i:4:p:679-703. See general 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: (Wiley-Blackwell Digital Licensing)

or (Christopher F. Baum)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.