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Exchange rate flexibility: How should we measure it?

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  • Michael Bleaney
  • Mo Tian

Abstract

This paper examines the extent of agreement between some recent exchange rate classification schemes, and also assesses the merits of some continuous measures of exchange rate flexibility. There is a probability of between 18 and 28 percent that a peg in one classification scheme is coded as a float in a different scheme, or vice versa. This probability is much smaller for the tightest forms of peg and the most volatile floats. An appropriately selected numerical index of exchange rate flexibility is potentially very useful.

Suggested Citation

  • Michael Bleaney & Mo Tian, 2019. "Exchange rate flexibility: How should we measure it?," Discussion Papers 2019/03, University of Nottingham, Centre for Finance, Credit and Macroeconomics (CFCM).
    • Handle: RePEc:not:notcfc:19/03
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    File URL: https://www.nottingham.ac.uk/cfcm/documents/papers/cfcm-2019-03.pdf
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    Cited by:

    1. Hiroyuki Ito & Masahiro Kawai, 2024. "Evolution of the International Monetary System from the Perspective of Trilemma Challenges," Public Policy Review, Policy Research Institute, Ministry of Finance Japan, vol. 20(2), pages 1-50, September.
    2. Michael Bleaney & Mo Tian, 2021. "Reserve Volatility and the Identification of Exchange Rate Regimes," Open Economies Review, Springer, vol. 32(4), pages 701-723, September.
    3. Ito, Hiro & Kawai, Masahiro, 2024. "Monetary and fiscal policy impacts under alternative trilemma regimes," Journal of International Money and Finance, Elsevier, vol. 149(C).
    4. Hiroyuki ITO & Masahiro KAWAI, 2024. "Size of Major Currency Zones and Their Determinants," Discussion papers 24059, Research Institute of Economy, Trade and Industry (RIETI).
    5. Ni, Yinan & Barth, James R. & Sun, Yanfei, 2022. "On the dynamic capital structure of nations: Theory and empirics," Research in International Business and Finance, Elsevier, vol. 62(C).
    6. Michael Bleaney & Mo Tian, 2020. "Exchange Rate Flexibility: How Should We Measure It?," Open Economies Review, Springer, vol. 31(4), pages 881-900, September.

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