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Fear of Floating: Exchange Rate Flexibility Indices

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  • Reinhart, Carmen

Abstract

Many emerging market countries have suffered financial crises. One view blames soft pegs for these crises. Adherents to that view suggest that countries move to corner solutions--hard pegs or floating exchange rates. We analyze the behavior of exchange rates, reserves, and interest rates to assess whether there is evidence that country practice is moving toward corner solutions. We focus on whether countries that claim they are floating are indeed doing so. We find that countries that say they allow their exchange rate to float mostly do not--there seems to be an epidemic case of “fear of floating.” The exchange rate flexibility indices calculated here provide and indication of the extent of "fear of floating."

Suggested Citation

  • Reinhart, Carmen, 2001. "Fear of Floating: Exchange Rate Flexibility Indices," MPRA Paper 13196, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:13196
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    More about this item

    Keywords

    Exchange rates; pegs; reserves; crises;
    All these keywords.

    JEL classification:

    • F3 - International Economics - - International Finance
    • F31 - International Economics - - International Finance - - - Foreign Exchange

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