Exchange Rate Regimes: Does What Countries Say Matter?
Traditionally, the IMF's Annual Report on Exchange Arrangements and Exchange Restrictions has been the main source of information about the exchange rate policies pursued by member countries. The classification contained therein has been used to document the evolution of exchange rate regimes over time as well as to study the relationship between economic performance and the choice of exchange rate system. Recently, a number of authors have challenged the results of these studies on the grounds that countries may not always be following the exchange rate policy that they have announced. New classifications have thus been created, designed to represent countries' actual exchange rate policy as opposed to their declared policy. It is sometimes claimed that the new so-called de facto classifications are superior to the older de jure classifications. In this paper we argue that neither the officially declared exchange rate regime nor the de facto regime tells the full story about exchange rate policy. Both contain useful information and need to be taken into account. In addition we argue that countries that claim to be floating but in fact have relatively stable exchange rates are not necessarily breaking any commitment, as sometimes has been suggested. Exchange rate stability may be the result of optimally chosen monetary policies. Furthermore, countries that use monetary policy instruments actively to stabilize their exchange rate may rationally not want to announce and commit to a fixed exchange rate because of a fear of being subject to speculative attacks. We present some empirical evidence consistent with this interpretation. Copyright 2005, International Monetary Fund
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Volume (Year): 52 (2005)
Issue (Month): si ()
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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.:
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"Fear of Floating,"
NBER Working Papers
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NBER Working Papers
8963, National Bureau of Economic Research, Inc.
- 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.
- Reinhart, Carmen & Rogoff, Kenneth, 2004. "The modern history of exchange rate arrangements: A reinterpretation," MPRA Paper 14070, University Library of Munich, Germany.
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"The Art of Gracefully Exiting a Peg,"
4432, University Library of Munich, Germany.
- Jorge Carrera & Guillermo Vuletin, 2003. "The Effects of Exchange Rate Regimes on Real Exchange Rate Volatility. A Dynamic Panel Data Approach," Anais do XXXI Encontro Nacional de Economia [Proceedings of the 31th Brazilian Economics Meeting] c67, ANPEC - Associação Nacional dos Centros de Pósgraduação em Economia [Brazilian Association of Graduate Programs in Economics].
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