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Defaults in the 90´s: Factbook and Preliminary Lessons

  • Federico Sturzenegger
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    The literature has identified at least five approaches to the determinants of the choice of exchange rate regimes: i) optimal currency area theory; ii) exchange rate policy and the absortion of real and nominal shocks; iii) exchange rate rules as a policy crutch in credibility-challenged economies; iv) the impossible trinity in light of increasing financial globalization; and v) the balance sheet exposure to exchange rate changes in financially dollarized economies. Using both a de facto and a de jure regime classification, we test the empirical relevance of these approaches simultaneously. We find overall empirical support for all of them, although their relative relevance varies substantially between industrial and non-industrial economies. We show that regime choices, as well as deviations between actual and reported policies, can be accurately predicted by a small number of economic and political characteristics of each country. When regimes are correctly characterized, they display no time trend, suggesting that the trends typically highlighted in the exchange rate regime debate can be traced back to the evolution of their natural determinants

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    File URL: http://www.utdt.edu/departamentos/empresarial/cif/pdfs-wp/wpcif-102002.pdf
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    Paper provided by Universidad Torcuato Di Tella in its series Business School Working Papers with number veintidos.

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    Length: 33 pages
    Date of creation: 2002
    Date of revision:
    Handle: RePEc:udt:wpbsdt:veintidos
    Contact details of provider: Postal: Miñones 2177 - (1428) Buenos Aires
    Web page: http://www.utdt.edu/listado_contenidos.php?id_item_menu=4994

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    1. Roberto Chang & Andrés Velasco, 1999. "Liquidity Crises in Emerging Markets: Theory and Policy," Documentos de Trabajo 59, Centro de Economía Aplicada, Universidad de Chile.
    2. Eichengreen, Barry & Ruehl, Christoph, 2000. "The Bail-In Problem: Systematic Goals, Ad Hoc Means," CEPR Discussion Papers 2427, C.E.P.R. Discussion Papers.
    3. Reuven Glick & Michael Hutchison, 1999. "Banking and currency crises; how common are twins?," Proceedings, Federal Reserve Bank of San Francisco, issue Sep.
    4. Jarrow, Robert A & Lando, David & Turnbull, Stuart M, 1997. "A Markov Model for the Term Structure of Credit Risk Spreads," Review of Financial Studies, Society for Financial Studies, vol. 10(2), pages 481-523.
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    6. Becker, Torbjorn & Richards, Anthony & Thaicharoen, Yunyong, 2003. "Bond restructuring and moral hazard: are collective action clauses costly?," Journal of International Economics, Elsevier, vol. 61(1), pages 127-161, October.
    7. Sebastian Edwards, 2002. "Does the Current Account Matter?," NBER Chapters, in: Preventing Currency Crises in Emerging Markets, pages 21-76 National Bureau of Economic Research, Inc.
    8. Andrew K. Rose, 2002. "One Reason Countries Pay Their Debts: Renegotiation and International Trade," Working Papers 042002, Hong Kong Institute for Monetary Research.
    9. Eichengreen, Barry & Mody, Ashoka, 1999. "Would Collective Action Clauses Raise Borrowing Costs?," CEPR Discussion Papers 2343, C.E.P.R. Discussion Papers.
    10. Chang, Roberto & Velasco, Andres, 2000. "Financial Fragility and the Exchange Rate Regime," Journal of Economic Theory, Elsevier, vol. 92(1), pages 1-34, May.
    11. Homi Kharas & Brian Pinto & Sergei Ulatov, 2001. "An Analysis of Russia's 1998 Meltdown: Fundamentals and Market Signals," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 32(1), pages 1-68.
    12. Darrell Duffie & Lasse Heje Pedersen & Kenneth J. Singleton, 2003. "Modeling Sovereign Yield Spreads: A Case Study of Russian Debt," Journal of Finance, American Finance Association, vol. 58(1), pages 119-159, 02.
    13. Luis Felipe Cespedes & Roberto Chang & Andres Velasco, 2000. "Balance Sheets and Exchange Rate Policy," NBER Working Papers 7840, National Bureau of Economic Research, Inc.
    14. Graciela L. Kaminsky & Carmen M. Reinhart, 1996. "The twin crises: the causes of banking and balance-of-payments problems," International Finance Discussion Papers 544, Board of Governors of the Federal Reserve System (U.S.).
    15. John J. Merrick Jr., 1999. "Crisis Dynamics of Implied Default Recovery Ratios: Evidence From Russia and Argentina," New York University, Leonard N. Stern School Finance Department Working Paper Seires 99-052, New York University, Leonard N. Stern School of Business-.
    16. Barro, R.J., 1989. "Economic Growth In A Cross Section Of Countries," RCER Working Papers 201, University of Rochester - Center for Economic Research (RCER).
    17. Andrew Powell, 2002. "The Argentina Crisis: Bad Luck, Bad Management, Bad Politics, Bad Advice," Business School Working Papers veinticuatro, Universidad Torcuato Di Tella.
    18. Roberto Chang & Andres Velasco, 1998. "Financial Crises in Emerging Markets," NBER Working Papers 6606, National Bureau of Economic Research, Inc.
    19. Ozler, Sule, 1992. "The evolution of credit terms : An empirical study of commercial bank lending to developing countries," Journal of Development Economics, Elsevier, vol. 38(1), pages 79-97, January.
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