How to Exit from Fixed Exchange Rate Regimes

Ahmet Atil Asici (), Nadezhda Ivanova and Charles Wyplosz ()

No 5141, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: This paper improves upon the recently developed literature on exits from fixed exchange rate regimes in three ways: 1) It allows for two indicators for post-exit macroeconomic conditions, the change in the exchange rate and the change in the output gap; 2) it tests whether the distinction between orderly and disorderly exit is statistically justified, and concludes that it is not; 3) it deals with the sample selection problem. The results, subject to extensive sensitivity analysis, suggest that post-exits are better when de-pegging occur in good macroeconomic conditions – an unnatural move for most policy-makers – when world interest rates decline and in the presence of capital controls. Importantly, ‘good’ macroeconomic policies do not seem to help with post-exit performance.

Keywords: exchange rate regimes; macroeconomic policy (search for similar items in EconPapers)
JEL-codes: C14 C34 F30 F31 F41 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-fmk and nep-mon
Date: 2005-07
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Related works:
Journal Article: How to exit from fixed exchange rate regimes? (2008)
Working Paper: How to Exit From Fixed Exchange Rate Regimes? (2005)
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