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The Performance of Exchange Rate Regimes in Developing Countries - Does the Classifications Scheme Matter?

  • Michael Bleaney,
  • Manuela Francisco

Official and four alternative regime classification schemes based on observed exchange rate behaviour are used to examine the relationship with inflation and growth in developing countries. For an identical sample of observations from 73 countries for 1984-2001, only the scheme based on parallel rates suggests a significant effect (negative) of floating on growth. Floats that claim to be pegs, or have high exchange rate volatility, are the ones with lower growth. Hard pegs offer inflation benefits. Floating is not consistently associated with higher inflation than soft pegs, and any apparent association is a possible by-product of the design of the classification algorithms.

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File URL: http://www.nottingham.ac.uk/credit/documents/papers/07-04.pdf
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Paper provided by University of Nottingham, CREDIT in its series Discussion Papers with number 07/04.

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Handle: RePEc:not:notcre:07/04
Contact details of provider: Postal: School of Economics University of Nottingham University Park Nottingham NG7 2RD
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Web page: http://www.nottingham.ac.uk/economics/
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  1. Broda, Christian, 2004. "Terms of trade and exchange rate regimes in developing countries," Journal of International Economics, Elsevier, vol. 63(1), pages 31-58, May.
  2. repec:rus:hseeco:181565 is not listed on IDEAS
  3. Michael Bleaney & Manuela Francisco, 2005. "Exchange rate regimes and inflation: only hard pegs make a difference," Canadian Journal of Economics, Canadian Economics Association, vol. 38(4), pages 1453-1471, November.
  4. Levy-Yeyati, Eduardo & Sturzenegger, Federico, 2005. "Classifying exchange rate regimes: Deeds vs. words," European Economic Review, Elsevier, vol. 49(6), pages 1603-1635, August.
  5. Carmen M. Reinhart & Kenneth S. Rogoff, 2004. "The Modern History of Exchange Rate Arrangements: A Reinterpretation," The Quarterly Journal of Economics, MIT Press, vol. 119(1), pages 1-48, February.
  6. Husain, Aasim M. & Mody, Ashoka & Rogoff, Kenneth S., 2005. "Exchange rate regime durability and performance in developing versus advanced economies," Journal of Monetary Economics, Elsevier, vol. 52(1), pages 35-64, January.
  7. Jay C. Shambaugh, 2004. "The Effect of Fixed Exchange Rates on Monetary Policy," The Quarterly Journal of Economics, MIT Press, vol. 119(1), pages 300-351, February.
  8. Alberto Alesina & Alexander F. Wagner, 2006. "Choosing (and Reneging on) Exchange Rate Regimes," Journal of the European Economic Association, MIT Press, vol. 4(4), pages 770-799, 06.
  9. Eduardo Levy-Yeyati & Federico Sturzenegger, 2003. "To Float or to Fix: Evidence on the Impact of Exchange Rate Regimes on Growth," American Economic Review, American Economic Association, vol. 93(4), pages 1173-1193, September.
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