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International monetary arrangements for the 21st century--Which way?

  • Hossain, Monzur

This paper examines some competing views on currency regime choice by applying the dynamic multi-state Markov (MSM) model to the regime transitions of 166 countries from 1980 to 1999. The findings suggest that the bipolar view is valid only in the long run and for a reason quite different from what the proponents had imagined, namely, economic development rather than crisis-driven exits. The estimated steady-state probabilities even predict that a unipolar fixed exchange rate system could emerge in the long run. Despite some divergence, both de jure and de facto regime data corroborate the key findings.

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

Volume (Year): 25 (2011)
Issue (Month): 2 (June)
Pages: 47-63

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Handle: RePEc:eee:jjieco:v:25:y:2011:i:2:p:47-63
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  1. Masson, Paul R., 2001. "Exchange rate regime transitions," Journal of Development Economics, Elsevier, vol. 64(2), pages 571-586, April.
  2. Leonardo Hernández & Peter Montiel, 2001. "Post-Crisis Exchange Rate Policy in Five Asian Countries: Filling in the "Hollow Middle"?," IMF Working Papers 01/170, International Monetary Fund.
  3. 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.
  4. 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.
  5. Jeffrey A. Frankel, 2003. "Experience of and Lessons from Exchange Rate Regime in Emerging Economies," NBER Working Papers 10032, National Bureau of Economic Research, Inc.
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  7. Obstfeld, Maurice, 1996. "Models of currency crises with self-fulfilling features," European Economic Review, Elsevier, vol. 40(3-5), pages 1037-1047, April.
  8. Jürgen von Hagen & Jizhong Zhou, 2005. "The choice of exchange rate regime: "An empirical analysis for transition economies" ," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 13(4), pages 679-703, October.
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  10. MASSON, Paul & RUGE-MURCIA, Francisco J., 2003. "Explaining the Transition Between Exchange Rate Regimes," Cahiers de recherche 15-2003, Centre interuniversitaire de recherche en économie quantitative, CIREQ.
  11. Atish R. Ghosh & Anne-Marie Gulde & Holger C. Wolf, 2003. "Exchange Rate Regimes: Choices and Consequences," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262072408, June.
  12. 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.
  13. Maurice Obstfeld & Kenneth Rogoff, 1995. "The mirage of fixed exchange rates," Working Papers in Applied Economic Theory 95-08, Federal Reserve Bank of San Francisco.
  14. Guillermo A. Calvo & Carmen M. Reinhart, 2002. "Fear of Floating," The Quarterly Journal of Economics, Oxford University Press, vol. 117(2), pages 379-408.
  15. Paolo Mauro & Grace Juhn, 2002. "Long-Run Determinants of Exchange Rate Regimes: A Simple Sensitivity Analysis," IMF Working Papers 02/104, International Monetary Fund.
  16. Hélène Poirson, 2001. "How Do Countries Choose their Exchange Rate Regime?," IMF Working Papers 01/46, International Monetary Fund.
  17. Hossain, Monzur, 2009. "Institutional development and the choice of exchange rate regime: A cross-country analysis," Journal of the Japanese and International Economies, Elsevier, vol. 23(1), pages 56-70, March.
  18. Monzur Hossain, 2009. "Divergence from de jure exchange rate regime: a stochastic process of learning," Applied Economics Letters, Taylor & Francis Journals, vol. 16(5), pages 475-479.
  19. 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.
  20. Lawrence H. Summers, 2000. "International Financial Crises: Causes, Prevention, and Cures," American Economic Review, American Economic Association, vol. 90(2), pages 1-16, May.
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