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Are We Floating Yet? Duration of Fixed Exchange Rate Regimes

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  • Menna Bizuneh

    (Pitzer College)

Abstract

This study examines the duration of fixed exchange rate regimes to determine the factors that impact the probability of an exit from a peg. Using de facto exchange rate regime classification, we find that duration of a peg is non-monotonic. The results of the semi-parametric proportional hazard model highlight that GDP growth and openness decrease the probability of an exit from a peg, while growing unemployment and increasing claims on government increase the likelihood of abandoning a peg. The negative impact of economic growth on the hazard rate is robust when we use marginal risk analysis and net foreign assets and inflation are found to influence the pegged regime duration.

Suggested Citation

  • Menna Bizuneh, 2022. "Are We Floating Yet? Duration of Fixed Exchange Rate Regimes," Eastern Economic Journal, Palgrave Macmillan;Eastern Economic Association, vol. 48(1), pages 63-89, January.
    • Handle: RePEc:pal:easeco:v:48:y:2022:i:1:d:10.1057_s41302-021-00206-7
    DOI: 10.1057/s41302-021-00206-7
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    More about this item

    Keywords

    Exchange rate regimes; Survival analysis; Marginal risk analysis;
    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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