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Measuring exchange rate flexibility in Europe


  • Gaetano, D'Adamo


In official terms, European countries that are not in the EMU have been showing a polarization of monetary policy regimes in the last fifteen years: either Inflation Targeting or fixed exchange rates. I apply several methods recently developed by the literature to measure exchange rate flexibility to these European countries, in order to see whether such polarization has indeed occurred from a de facto point of view. Using these approaches, I find that the move to Inflation Targeting did bring about higher exchange rate flexibility, but only up to a level that is not comparable to that of the non-European benchmark floaters. Inflation Targeters in Europe also seem to have put some weight on stabilization of the exchange rate vis à vis the euro, after its introduction; fixed exchange rate arrangements, instead, apart from official policy changes, remained mostly stable throughout the last decade.

Suggested Citation

  • Gaetano, D'Adamo, 2009. "Measuring exchange rate flexibility in Europe," MPRA Paper 26612, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:26612

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    References listed on IDEAS

    1. Jeffrey Frankel & Shang-Jin Wei, 2008. "Estimation of De Facto Exchange Rate Regimes: Synthesis of the Techniques for Inferring Flexibility and Basket Weights," IMF Staff Papers, Palgrave Macmillan, vol. 55(3), pages 384-416, July.
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    13. Levy-Yeyati, Eduardo & Sturzenegger, Federico, 2005. "Classifying exchange rate regimes: Deeds vs. words," European Economic Review, Elsevier, vol. 49(6), pages 1603-1635, August.
    14. Frankel, Jeffrey A. & Fajnzylber, Eduardo & Schmukler, Sergio L. & Serven, Luis, 2001. "Verifying exchange rate regimes," Journal of Development Economics, Elsevier, vol. 66(2), pages 351-386, December.
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    18. repec:hrv:faseco:34721963 is not listed on IDEAS
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    More about this item


    Exchange Rate Regimes; Fear of Floating; Inflation Targeting;

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • F31 - International Economics - - International Finance - - - Foreign Exchange


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