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Transitions in exchange rate regimes in the aftermath of the global economic crisis

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  • Graham Bird
  • Alex Mandilaras

Abstract

Has the global economic crisis resulted in countries shifting their exchange rate regimes and, if so, in what way? Focusing on the relevant period of 2008-2012, and using the IMF's Annual Report on Exchange Arrangements and Exchange Restrictions classification of exchange rate regimes and database, we calculate exchange rate regime transition probabilities and test their statistical significance. Even though there is some evidence of state dependence, in the sense that transitions are relatively infrequent, we do find that these are significant, especially in the direction of fixity. Our testing procedure employs the Wilson (1927) statistic, which is appropriate for drawing inference based on relatively rare events. By examining all transitions in detail, we also find further evidence that countries that shift often flip back to their previous regime.

Suggested Citation

  • Graham Bird & Alex Mandilaras, 2015. "Transitions in exchange rate regimes in the aftermath of the global economic crisis," Applied Economics Letters, Taylor & Francis Journals, vol. 22(7), pages 567-571, May.
  • Handle: RePEc:taf:apeclt:v:22:y:2015:i:7:p:567-571
    DOI: 10.1080/13504851.2014.957438
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    References listed on IDEAS

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    1. von Hagen, Jurgen & Zhou, Jizhong, 2007. "The choice of exchange rate regimes in developing countries: A multinomial panel analysis," Journal of International Money and Finance, Elsevier, vol. 26(7), pages 1071-1094, November.
    2. Paul Masson & Francisco J. Ruge-Murcia, 2005. "Explaining the Transition between Exchange Rate Regimes," Scandinavian Journal of Economics, Wiley Blackwell, vol. 107(2), pages 261-278, June.
    3. Eichengreen, Barry & Rose, Andrew, 2014. "Capital Controls in the 21st Century," Journal of International Money and Finance, Elsevier, vol. 48(PA), pages 1-16.
    4. Klein, Michael W. & Shambaugh, Jay C., 2008. "The dynamics of exchange rate regimes: Fixes, floats, and flips," Journal of International Economics, Elsevier, vol. 75(1), pages 70-92, May.
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    JEL classification:

    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions

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