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How to Exit from Fixed Exchange Rate Regimes

Author

Listed:
  • Asici, Ahmet Atil
  • Ivanova, Nadezhda
  • Wyplosz, Charles

Abstract

This paper improves upon the recently developed literature on exits from fixed exchange rate regimes in three ways: 1) It allows for two indicators for post-exit macroeconomic conditions, the change in the exchange rate and the change in the output gap; 2) it tests whether the distinction between orderly and disorderly exit is statistically justified, and concludes that it is not; 3) it deals with the sample selection problem. The results, subject to extensive sensitivity analysis, suggest that post-exits are better when de-pegging occur in good macroeconomic conditions – an unnatural move for most policy-makers – when world interest rates decline and in the presence of capital controls. Importantly, ‘good’ macroeconomic policies do not seem to help with post-exit performance.

Suggested Citation

  • Asici, Ahmet Atil & Ivanova, Nadezhda & Wyplosz, Charles, 2005. "How to Exit from Fixed Exchange Rate Regimes," CEPR Discussion Papers 5141, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:5141
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Michael W. Klein & Jay C. Shambaugh, 2006. "The Nature of Exchange Rate Regimes," NBER Working Papers 12729, National Bureau of Economic Research, Inc.
    2. Kosta Josifidis & Jean-Pierre Allegret & Emilija Beker Pucar, 2009. "Monetary and Exchange Rate Regimes Changes: The Cases of Poland, Czech Republic, Slovakia and Republic of Serbia," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 56(2), pages 199-226, June.
    3. 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.
    4. Ahmet Atil Asici, 2010. "Parametric and non-parametric approaches to exits from fixed exchange rate regimes," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 15(4), pages 381-406.
    5. Alejandro D Guerson, 2015. "Inflation Dynamics and Monetary Policy in Bolivia," IMF Working Papers 15/266, International Monetary Fund.
    6. Felix Fischer & Charlotte J. Lundgren & Samir Jahjah, 2013. "Making Monetary Policy More Effective; The Case of the Democratic Republic of the Congo," IMF Working Papers 13/226, International Monetary Fund.
    7. Nadezhda Ivanova, 2007. "Estimation of the Equilibrium Real Exchange Rate in Russia: Trade-Balance Approach," Working Papers w0102, Center for Economic and Financial Research (CEFIR).

    More about this item

    Keywords

    exchange rate regimes; macroeconomic policy;

    JEL classification:

    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • C34 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Truncated and Censored Models; Switching Regression Models
    • F30 - International Economics - - International Finance - - - General
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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