From Fixers to Floaters: an Empirical Analysis of the Decline in Fixed Exchange Rate Regimes

Espen Bratberg (), L.E. Legernes and Erling Vårdal ()

Norway; Department of Economics, University of Bergen from Department of Economics, University of Bergen

Abstract: The purpose of this article is to explain the decrease in the fixed exchange rate regimes we have experienced the last decades. Our econometric approach is duration analysis, and the explanatory variables used are taken from the literature on optimum currency areas. The sample consists of 51 countries and covers the period 1973-1995. The degree of openness proves to be the most influential variable. Increasing openness by 1% decreases the hazard for adopting a floating exchange rate by 1.29%, i.e. an elasticiy of -1.29. The size of a country and the inflationary differential against foreign countries are also significant. But the corresponding elasticities (0.19 and 0.25) are considerably lower than for openness.

Keywords: EXCHANGE RATE; INTERNATIONAL ECONOMY; MONETARY POLICY (search for similar items in EconPapers)
JEL-codes: F31 E52 (search for similar items in EconPapers)
Date: 1999
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Persistent link: http://EconPapers.repec.org/RePEc:fth:bereco:1599

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