Country Characteristics and the Choice of the Exchange Rate Regime: Are Mini-skirts Followed by Maxis?
We use a sample of 140 countries to study empirically how a country's characteristics are associated with its choice of an exchange rate regime. When countries are classified according to their current exchange rate arrangements, we observe that small countries with low diversification of exports are the most likely candidates to peg their exchange rates. Other country characteristics, such as the level of development, openness of the real or financial sector, geographical diversification of exports, and fluctuations in the terms of trade, have hardly any power to explain the choice of an exchange rate system. Somewhat surprisingly, it is developing countries which have moved towards more flexible exchange rate practices during the last ten years, while countries with well diversified exports have adopted more rigid exchange rate arrangements. The regression results predict that Italy, Spain and the United Kingdom should have floating exchange rates, while Israel, New Zealand and Switzerland should adopt a more rigid exchange rate regime. Finland should adopt a regime of limited flexibility (such as the EMS) rather than peg to a basket or float.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
|Date of creation:||Dec 1992|
|Date of revision:|
|Contact details of provider:|| Postal: Centre for Economic Policy Research, 77 Bastwick Street, London EC1V 3PZ.|
Phone: 44 - 20 - 7183 8801
Fax: 44 - 20 - 7183 8820
|Order Information:|| Email: |
When requesting a correction, please mention this item's handle: RePEc:cpr:ceprdp:744. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()
If references are entirely missing, you can add them using this form.