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Duration of fixed exchange rate regimes in emerging economies

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  • Tamgac, Unay

Abstract

This paper examines the duration of fixed exchange rate regimes and investigates whether there is a certain pattern of time dependence in the survival rate of pegged exchange rate regimes for emerging economies. We query why some fixed regimes last longer and determine the macroeconomic, social and political factors that make a pegged regime more durable. We use survival analysis, a technique which accounts for the unobservable cumulative effects associated with maintaining a fixed exchange rate that build up over the duration of a regime. In our model, time enters as a proxy for these unobserved persistent effects as we investigate the relative importance of the fundamentals in the economy on regime durability by considering their relation together with the effect of time itself. Using the de facto exchange rate regime classification proposed by Reinhart and Rogoff (2004), we find non-monotonic duration dependence and show that time is a significant factor for the duration of pegged regimes. Openness, changes in foreign reserves, growth, real exchange rate misalignment, claims on government and sociopolitical instability are also found to influence the pegged regime duration.

Suggested Citation

  • Tamgac, Unay, 2013. "Duration of fixed exchange rate regimes in emerging economies," Journal of International Money and Finance, Elsevier, vol. 37(C), pages 439-467.
  • Handle: RePEc:eee:jimfin:v:37:y:2013:i:c:p:439-467
    DOI: 10.1016/j.jimonfin.2013.06.015
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    2. Terence Tai-Leung Chong & Qing He & Wing Hong Chan, 2016. "From Fixed to Float: A Competing Risks Analysis," International Economic Journal, Taylor & Francis Journals, vol. 30(4), pages 488-503, October.
    3. Babu Rao G., 2019. "Exchange rate regimes and its impact on growth: An empirical analysis of BRICS countries," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania - AGER, vol. 0(2(619), S), pages 157-172, Summer.

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    More about this item

    Keywords

    Exchange rate regime; Survival analysis; Duration; Emerging economies;
    All these keywords.

    JEL classification:

    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions

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