The Global Implications of Regional Exchange Rate Regines

Harris Dellas and George S. Tavlas

No 18, Working Papers from Bank of Greece

Abstract: We examine the implications of a regional, fixed exchange rate regime for global exchange rate volatility. The concept of the optimum currency area turns out to play an important role. The formation of a regional regime tends to decrease global volatility when countries are symmetric. The effects tend to be ambiguous in the case of asymmetries. The reduction in global volatility is larger when the rest of the world has more rigid labor markets than the peggers. When the exchange rate management is done mostly by countries with relatively more flexible labor markets. And in the presence of a negative correlation in productivity shocks across countries.

Keywords: Regional exchange rate systems; global exchange rate volatility; optimum currency area (search for similar items in EconPapers)
JEL-codes: E4 E5 F4 (search for similar items in EconPapers)
Date: 2004-10
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Published in Journal of International Money and Finance, 2005, 24 (2), pp. 243-255

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Related works:
Working Paper: The Global Implications of Regional Exchange Rate Regimes (2003)
Journal Article: The global implications of regional exchange rate regimes (2005)
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Persistent link: http://EconPapers.repec.org/RePEc:bog:wpaper:18

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