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Post-crisis exchange rate policy in five Asian countries: Filling in the "hollow middle"?

  • Hernandez, Leonardo
  • Montiel, Peter J.

Following the 1997-98 financial turmoil, crisis countries in Asia moved toward either floating or fixed exchange rate systems, reinforcing the bipolar view of exchange rate regimes and the "hollow middle" hypothesis. But some academics have claimed that the crisis countries' policies have been similar in the post- and pre-crisis periods. This paper analyzes the evidence and concludes that, except for Malaysia, which adopted a hard peg and imposed capital controls, the other crisis countries are floating more than before, though less than "real" floaters do. Further, the crisis countries' policies during the post-crisis period can be justified on second-best arguments.

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File URL: http://www.sciencedirect.com/science/article/pii/S0889-1583(03)00007-8
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Article provided by Elsevier in its journal Journal of the Japanese and International Economies.

Volume (Year): 17 (2003)
Issue (Month): 3 (September)
Pages: 336-369

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Handle: RePEc:eee:jjieco:v:17:y:2003:i:3:p:336-369
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/622903

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  1. Joshua Aizenman & Nancy Marion, 2002. "The high demand for international reserves in the Far East: what's going on?," Pacific Basin Working Paper Series 2002-08, Federal Reserve Bank of San Francisco.
  2. Barry Eichengreen & Ricardo Hausmann, 1999. "Exchange Rates and Financial Fragility," NBER Working Papers 7418, National Bureau of Economic Research, Inc.
  3. Girton, Lance & Roper, Don, 1977. "A Monetary Model of Exchange Market Pressure Applied to the Postwar Canadian Experience," American Economic Review, American Economic Association, vol. 67(4), pages 537-48, September.
  4. Reinhart, Carmen & Calvo, Guillermo, 2001. "Fixing for your life," MPRA Paper 13873, University Library of Munich, Germany.
  5. Ricardo Hausmann & Ugo Panizza & Ernesto H. Stein, 2000. "Why Do Countries Float the Way They Float?," IDB Publications (Working Papers) 6467, Inter-American Development Bank.
  6. repec:idb:wpaper:418 is not listed on IDEAS
  7. Guillermo A. Calvo & Carmen M. Reinhart, 2002. "Fear of Floating," The Quarterly Journal of Economics, Oxford University Press, vol. 117(2), pages 379-408.
  8. 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.
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