The Survival of Intermediate Exchange Rate Regimes

Agnès Bénassy-Quéré () and Benoit Cœure

Working Papers from CEPII research center

Abstract: We propose a model of exchange-rate regime choice which accounts for the existence of a continuous range of regimes, the need for real exchange-rate adjustment in response to shocks, the existence of capital account shocks and of balance-sheet effects, the sensitivity of prices to the nominal exchange rate, and the need for a commitment to make any given regime sustainable. Non-ordered Logit estimations on a cross-section sample of 126 emerging and developed countries before and after 1997-1998 currency crises broadly support our approach.. Specifically, we find that there is still a case for intermediate regimes in countries where the interest rate channel is weaker and which do not depend too much on commodities. The empirical model correctly predicts up to 83% of observed exchange rate regimes, and the recent "hollowing out" of intermediate regimes. It also provides a benchmark to assess the recent changes in individual exchange rate regimes.

Keywords: Exchange rate regime; Developing countries; Logit model (search for similar items in EconPapers)
JEL-codes: F33 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dcm, nep-ifn and nep-rmg
Date: 2002-07
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Working Paper: The Survival of Intermediate Exchange rate Regimes (2002)
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Persistent link: http://EconPapers.repec.org/RePEc:cii:cepidt:2002-07

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