IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Log in (now much improved!) to save this article

Institutional development and the choice of exchange rate regime: A cross-country analysis

Listed author(s):
  • Hossain, Monzur

This paper investigates the choice of exchange rate regime by analyzing both de jure and de facto regime choices for the period 1973-1996. It finds that economic fundamentals, financial and political institutional variables provide relevant guidance for de jure regime choices. However, shocks are found to be the determinants of a de facto regime choice. The analysis shows that only a highly financially liberalized economy can sustain a corner regime. A partial financial liberalization increases the probability of divergence from the de jure regime in the face of various shocks, but an increase in the level of financial reforms decreases the probability of divergence. Moreover, regime choices are influenced by the IMF and regional financial architecture. The political institutions play an important role in the choice of a regime; however, their role varies with the level of financial development. J. Japanese Int. Economies 23 (1) (2009) 56-70.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.sciencedirect.com/science/article/pii/S0889-1583(09)00003-3
Download Restriction: Full text for ScienceDirect subscribers only

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Article provided by Elsevier in its journal Journal of the Japanese and International Economies.

Volume (Year): 23 (2009)
Issue (Month): 1 (March)
Pages: 56-70

as
in new window

Handle: RePEc:eee:jjieco:v:23:y:2009:i:1:p:56-70
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/622903

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as
in new window

  1. Carmen M. Reinhart & Kenneth S. Rogoff, 2004. "The Modern History of Exchange Rate Arrangements: A Reinterpretation," The Quarterly Journal of Economics, Oxford University Press, vol. 119(1), pages 1-48.
  2. Alberto Alesina & Alexander Wagner, 2003. "Choosing (and reneging on) exchange rate regimes," NBER Working Papers 9809, National Bureau of Economic Research, Inc.
  3. William D. Nordhaus, 1989. "Alternative Approaches to the Political Business Cycle," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 20(2), pages 1-68.
  4. Keefer, Philip & Stasavage, David, 2002. "Checks and Balances, Private Information, and the Credibility of Monetary Commitments," International Organization, Cambridge University Press, vol. 56(04), pages 751-774, September.
  5. Baxter, Marianne & Stockman, Alan C., 1989. "Business cycles and the exchange-rate regime : Some international evidence," Journal of Monetary Economics, Elsevier, vol. 23(3), pages 377-400, May.
  6. Hans Genberg & Alexander K. Swoboda, 2004. "Exchange-Rate Regimes: "Does What Countries Say Matter?"," IHEID Working Papers 07-2004, Economics Section, The Graduate Institute of International Studies.
  7. Leonardo Hernández & Peter Montiel, 2001. "Post-Crisis Exchange Rate Policy in Five Asian Countries: Filling in the "Hollow Middle"?," Center for Development Economics 167, Department of Economics, Williams College.
  8. Paolo Mauro & Grace Juhn, 2002. "Long-Run Determinants of Exchange Rate Regimes; A Simple Sensitivity Analysis," IMF Working Papers 02/104, .
  9. von Hagen, Jürgen & Zhou, Jizhong, 2002. "The Choice of Exchange Rate Regimes: An Empirical Analysis for Transition Economies," CEPR Discussion Papers 3289, C.E.P.R. Discussion Papers.
  10. Salant, Stephen W & Henderson, Dale W, 1978. "Market Anticipations of Government Policies and the Price of Gold," Journal of Political Economy, University of Chicago Press, vol. 86(4), pages 627-648, August.
  11. Abdul Abiad & Ashoka Mody, 2005. "Financial Reform: What Shakes It? What Shapes It?," American Economic Review, American Economic Association, vol. 95(1), pages 66-88, March.
  12. Guillermo A. Calvo & Carmen M. Reinhart, 2002. "Fear of Floating," The Quarterly Journal of Economics, Oxford University Press, vol. 117(2), pages 379-408.
  13. Eichengreen, B., 1992. "Should the Maastricht Treaty be Saved?," Princeton Studies in International Economics 74, International Economics Section, Departement of Economics Princeton University,.
  14. Bernhard, William & Broz, J. Lawrence & Clark, William Roberts, 2002. "The Political Economy of Monetary Institutions," International Organization, Cambridge University Press, vol. 56(04), pages 693-723, September.
  15. Bacchetta, Philippe, 1992. "Liberalization of Capital Movements and of the Domestic Financial System," Economica, London School of Economics and Political Science, vol. 59(236), pages 465-474, November.
  16. Helene Poirson Ward, 2001. "How Do Countries Choose their Exchange Rate Regime?," IMF Working Papers 01/46, .
  17. Melvin, Michael, 1985. "The Choice of an Exchange Rate System and Macroeconomic Stability," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 17(4), pages 467-478, November.
  18. Barry Eichengreen & Ricardo Hausmann, 1999. "Exchange rates and financial fragility," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 329-368.
  19. Abdul d Abiad & Nienke Oomes & Kenichi Ueda, 2004. "The Quality Effect; Does Financial Liberalization Improve the Allocation of Capital?," IMF Working Papers 04/112, .
  20. Aasim M. Husain & Ashoka Mody & Nienke Oomes & Robin Brooks & Kenneth Rogoff, 2003. "Evolution and Performance of Exchange Rate Regimes," IMF Working Papers 03/243, .
  21. Savvides, Andreas, 1990. "Real exchange rate variability and the choice of exchange rate regime by developing countries," Journal of International Money and Finance, Elsevier, vol. 9(4), pages 440-454, December.
  22. Roubini, Nouriel & Sachs, Jeffrey D., 1989. "Political and economic determinants of budget deficits in the industrial democracies," European Economic Review, Elsevier, vol. 33(5), pages 903-933, May.
  23. Heller, H Robert, 1978. "Determinants of Exchange Rate Practices," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 10(3), pages 308-321, August.
  24. Hallerberg, Mark, 2002. "Veto Players and the Choice of Monetary Institutions," International Organization, Cambridge University Press, vol. 56(04), pages 775-802, September.
  25. Bernhard, William & Leblang, David, 1999. "Democratic Institutions and Exchange-rate Commitments," International Organization, Cambridge University Press, vol. 53(01), pages 71-97, December.
  26. Dreyer, Jacob S., 1978. "Determinants of exchange-rate regimes for currencies of developing countries: Some preliminary results," World Development, Elsevier, vol. 6(4), pages 437-445, April.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:eee:jjieco:v:23:y:2009:i:1:p:56-70. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Dana Niculescu)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.