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Fear of floating

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  • Reinhart, Carmen
  • Calvo, Guillermo

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.”

Suggested Citation

  • Reinhart, Carmen & Calvo, Guillermo, 2002. "Fear of floating," MPRA Paper 14000, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:14000
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    References listed on IDEAS

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    More about this item

    Keywords

    exchange rates pegs reserves interest rates credibility fear of floating;

    JEL classification:

    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • F30 - International Economics - - International Finance - - - General
    • F31 - International Economics - - International Finance - - - Foreign Exchange

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