Exchange arrangements and economic growth: What relationship is there?

This article provides empirical support for the hypothesis that different exchange rate regimes have an impact on economic growth in advanced, emerging and developing countries. The effects of different exchange rate arrangements on economic growth are examined through least squares dummy variable regressions using panel data on 125 countries during the post-Bretton Woods period (1974-1999). Also, this article addresses the issue of measurement errors in the classification of exchange rate regimes by using four different classification schemes. Three de facto and one de jure classifications are used. Consequently, the sensitivity of these results to alternative exchange rate classifications is also tested. The empirical findings indicate that developing countries with fixed regimes tend to have a higher economic growth.