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Exploring different views of exchange rate regime choice


  • Carmignani, Fabrizio
  • Colombo, Emilio
  • Tirelli, Patrizio


The empirical distinction between de facto and de jure exchange rate regimes raises a number of interesting questions. Which factors may induce a de facto peg? Why do countries enforce a peg but do not announce it? Why do countries "break their promises"? We show that a stable socio-political environment and an efficient political decision-making process are a necessary prerequisite for choosing a peg and sticking to it, challenging the view that sees the exchange rate as a commitment device. Policymakers seem rather concerned with regime sustainability in the face of adverse economic and socio-political fundamentals.

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  • Carmignani, Fabrizio & Colombo, Emilio & Tirelli, Patrizio, 2008. "Exploring different views of exchange rate regime choice," Journal of International Money and Finance, Elsevier, vol. 27(7), pages 1177-1197, November.
  • Handle: RePEc:eee:jimfin:v:27:y:2008:i:7:p:1177-1197

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    Cited by:

    1. Michael Bleaney & Mo Tian & Lin Yin, 2016. "Global Trends in the Choice of Exchange Rate Regime," Open Economies Review, Springer, vol. 27(1), pages 71-85, February.
    2. Carmignani, Fabrizio & Colombo, Emilio & Tirelli, Patrizio, 2011. "Macroeconomic risk and the (de)stabilising role of government size," European Journal of Political Economy, Elsevier, vol. 27(4), pages 781-790.
    3. Rodriguez, Cesar M., 2016. "Economic and political determinants of exchange rate regimes: The case of Latin America," International Economics, Elsevier, vol. 147(C), pages 1-26.
    4. Liu, Xiaohui & Zhang, Jing, 2015. "Export diversification and exchange-rate regimes: Evidences from 72 developing countries," MPRA Paper 66448, University Library of Munich, Germany.
    5. Belke, Ansgar & Potrafke, Niklas, 2012. "Does government ideology matter in monetary policy? A panel data analysis for OECD countries," Journal of International Money and Finance, Elsevier, vol. 31(5), pages 1126-1139.
    6. Méon, Pierre-Guillaume & Minne, Geoffrey, 2014. "Mark my words: Information and the fear of declaring an exchange rate regime," Journal of Development Economics, Elsevier, vol. 107(C), pages 244-261.
    7. AsIcI, Ahmet AtIl, 2011. "Exchange rate regime choice and currency crises," Economic Systems, Elsevier, vol. 35(3), pages 419-436, September.
    8. Pierre-Guillaume Méon & Geoffrey Minne, 2011. "Mark my Words: Information and the Fear of Declaring one’s Exchange Rate Regime," Working Papers CEB 11-040, ULB -- Universite Libre de Bruxelles.
    9. Philipp Harms & Mathias Hoffmann, 2011. "Deciding to Peg the Exchange Rate in Developing Countries: The Role of Private-Sector Debt," Open Economies Review, Springer, vol. 22(5), pages 825-846, November.
    10. Berdiev, Aziz N. & Kim, Yoonbai & Chang, Chun Ping, 2012. "The political economy of exchange rate regimes in developed and developing countries," European Journal of Political Economy, Elsevier, vol. 28(1), pages 38-53.
    11. Carmignani, Fabrizio, 2009. "The distributive effects of institutional quality when government stability is endogenous," European Journal of Political Economy, Elsevier, vol. 25(4), pages 409-421, December.
    12. Bohn Frank, 2013. "The Politics of Surprise Devaluations: Modelling Motives for Giving Up a Peg," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 233(5-6), pages 562-574, October.
    13. Graham Bird & Alex Mandilaras & Helen Popper, 2012. "Explaining Shifts in Exchange Rate Regimes," School of Economics Discussion Papers 1312, School of Economics, University of Surrey.
    14. Mohamed Sfia, 2011. "The choice of exchange rate regimes in the MENA countries: a probit analysis," International Economics and Economic Policy, Springer, vol. 8(3), pages 275-305, September.
    15. Bersch, Julia & Klüh, Ulrich H., 2007. "When countries do not do what they say: Systematic discrepancies between exchange rate regime announcements and de facto policies," Discussion Papers in Economics 2072, University of Munich, Department of Economics.
    16. Holtemöller, Oliver & Mallick, Sushanta, 2013. "Exchange rate regime, real misalignment and currency crises," Economic Modelling, Elsevier, vol. 34(C), pages 5-14.
    17. Chowdhury, Mohammad Tarequl H. & Bhattacharya, Prasad Sankar & Mallick, Debdulal & Ulubaşoğlu, Mehmet Ali, 2014. "An empirical inquiry into the role of sectoral diversification in exchange rate regime choice," European Economic Review, Elsevier, vol. 67(C), pages 210-227.
    18. Feryel Ouerghi, 2013. "Global Financial Crisis: Did Exchange Rate Politics Help Emerging Countries To Be More Resilient," International Journal of Economics and Financial Issues, Econjournals, vol. 3(4), pages 949-963.
    19. Ross J. Hallren, 2015. "Quasi-experimental analysis of the impact of exchange rate regime selection on crisis recovery: evidence from the Asian Financial Crisis," Applied Economics Letters, Taylor & Francis Journals, vol. 22(8), pages 613-618, May.
    20. María Franco Chuaire & Carlos Scartascini & Mariano Tommasi, 2017. "State capacity and the quality of policies. Revisiting the relationship between openness and government size," Economics and Politics, Wiley Blackwell, vol. 29(2), pages 133-156, July.
    21. Ghosh, Amit, 2014. "A comparison of exchange rate regime choice in emerging markets with advanced and low income nations for 1999–2011," International Review of Economics & Finance, Elsevier, vol. 33(C), pages 358-370.
    22. Jetter, Michael, 2014. "Volatility and growth: Governments are key," European Journal of Political Economy, Elsevier, vol. 36(C), pages 71-88.
    23. Maria Franco & Carlos Scartascini & Mariano Tommasi, 2014. "State Capacity and the Quality of Policies: Revisiting the Relationship between Openness and the Size of Government," IDB Publications (Working Papers) 86254, Inter-American Development Bank.


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