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Fear of Floating

Author

Listed:
  • Guillermo A. Calvo
  • Carmen M. Reinhart

Abstract

Many emerging market countries have suffered financial crises. One view blames soft pegs for these crises. Adherents of this view suggest that countries move to corner solutions—hard pegs or floating exchange rates. We analyze the behavior of exchange rates, reserves, and interest rates to assess whether there is evidence that country practice is moving toward corner solutions. We focus on whether countries that claim they are floating are indeed doing so. We find that countries that say they allow their exchange rate to float mostly do not—there seems to be an epidemic case of "fear of floating."

Suggested Citation

  • Guillermo A. Calvo & Carmen M. Reinhart, 2002. "Fear of Floating," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 117(2), pages 379-408.
    • Handle: RePEc:oup:qjecon:v:117:y:2002:i:2:p:379-408.
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    File URL: http://hdl.handle.net/10.1162/003355302753650274
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    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions

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