Stabilizing Properties of Flexible Exchange Rates: Evidence from the Global Financial Crisis
Inflation targeting countries with flexible exchange rates performed better during the global financial crisis and its aftermath than countries with a fixed exchange rate. Countries that maintained a hard fixed exchange rate throughout the past six years performed somewhat better than those that abandoned it. But, abandoning a hard fix during a crisis is itself evidence of the economic costs of fixed rates. It is particularly telling that no inflation targeting country with a flexible exchange rate abandoned its regime during the crisis. Policymakers in many countries are averse to volatile exchange rates—they have a "fear of floating." Gagnon's results strongly suggest that flexible exchange rates enable countries to weather crises better than fixed rates and that the benefits of flexible rates are not limited to large countries. Policymakers should replace their fear of floating with a fear of fixing.
|Date of creation:||Nov 2013|
|Date of revision:|
|Contact details of provider:|| Postal: 1750 Massachusetts Avenue, NW, Washington, DC 20036-1903|
Web page: http://www.piie.com
More information through EDIRC
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.:
- Klein, Michael W. & Shambaugh, Jay C., 2012.
"Exchange Rate Regimes in the Modern Era,"
MIT Press Books,
The MIT Press,
edition 1, volume 1, number 026251799x, March.
- Flood, Robert P & Rose, Andrew K, 1993.
"Fixing Exchange Rates: A Virtual Quest for Fundamentals,"
CEPR Discussion Papers
838, C.E.P.R. Discussion Papers.
- Flood, Robert P. & Rose, Andrew K., 1995. "Fixing exchange rates A virtual quest for fundamentals," Journal of Monetary Economics, Elsevier, vol. 36(1), pages 3-37, August.
- Robert P. Flood & Andrew K. Rose, 1993. "Fixing Exchange Rates: A Virtual Quest for Fundamentals," NBER Working Papers 4503, National Bureau of Economic Research, Inc.
- Flood, R.P. & Rose, A.K., 1992. "Fixing Exchange Rates: A Virtual Quest for Fundamentals," Papers 529, Stockholm - International Economic Studies.
- Reinhart, Carmen & Calvo, Guillermo, 2002.
"Fear of floating,"
14000, University Library of Munich, Germany.
- Stanley Fischer, 2001. "Exchange Rate Regimes: Is the Bipolar View Correct?," Journal of Economic Perspectives, American Economic Association, vol. 15(2), pages 3-24, Spring.
- Rose, Andrew K., 2014.
"Surprising similarities: Recent monetary regimes of small economies,"
Journal of International Money and Finance,
Elsevier, vol. 49(PA), pages 5-27.
- Rose, Andrew K., 2013. "Surprising similarities: recent monetary regimes of small economies," Proceedings, Federal Reserve Bank of San Francisco, issue Nov, pages 1-44.
- Rose, Andrew K, 2013. "Surprising Similarities: Recent Monetary Regimes of Small Economies," CEPR Discussion Papers 9684, C.E.P.R. Discussion Papers.
- Andrew K. Rose, 2013. "Surprising Similarities: Recent Monetary Regimes of Small Economies," NBER Working Papers 19632, National Bureau of Economic Research, Inc.
- Anders Aslund, 2010. "The Last Shall Be the First: The East European Financial Crisis," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 5218, January.
When requesting a correction, please mention this item's handle: RePEc:iie:pbrief:pb13-28. 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: (Peterson Institute webmaster)
If references are entirely missing, you can add them using this form.