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Is the exchange rate regime really irrelevant for external adjustment?

  • Ghosh, Atish R.
  • Qureshi, Mahvash S.
  • Tsangarides, Charalambos G.

We argue that evidence on whether floating exchange rates facilitate external adjustment is contradictory because existing regime classifications do not adequately capture exchange rate flexibility relevant to external adjustment. Using a trade-weighted bilateral exchange rate volatility measure, we show that exchange rate flexibility indeed matters for current account dynamics.

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File URL: http://www.sciencedirect.com/science/article/pii/S0165176512005174
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Article provided by Elsevier in its journal Economics Letters.

Volume (Year): 118 (2013)
Issue (Month): 1 ()
Pages: 104-109

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Handle: RePEc:eee:ecolet:v:118:y:2013:i:1:p:104-109
Contact details of provider: Web page: http://www.elsevier.com/locate/ecolet

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  1. Sabine Herrmann, 2009. "Do We Really Know That Flexible Exchange Rates Facilitate Current Account Adjustment? Some New Empirical Evidence for CEE Countries," Applied Economics Quarterly (formerly: Konjunkturpolitik), Duncker & Humblot, Berlin, vol. 55(4), pages 295-312.
  2. Menzie D. Chinn & Shang-Jin Wei, 2009. "A Faith-based Initiative: Does a Flexible Exchange Rate Regime Really Facilitate Current Account Adjustment?," Working Papers 122009, Hong Kong Institute for Monetary Research.
  3. Carmen M. Reinhart & Kenneth S. Rogoff, 2004. "The Modern History of Exchange Rate Arrangements: A Reinterpretation," The Quarterly Journal of Economics, MIT Press, vol. 119(1), pages 1-48, February.
  4. 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.
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