The Global Implications of Regional Exchange Rate Regimes

Harris Dellas and George S. Tavlas

No 82003, Working Papers from Hong Kong Institute for Monetary Research

Abstract: We examine the implications of a regional fixed exchange rate regime for global exchange rate volatility. We find that the concept of the optimum currency area plays a key role. There are significant effects on the volatility of the remaining flexible parities when the countries participating in the regional peg ¡V the ¡§ins¡¨ ¡V are not an optimum currency area. Or, but to a smaller extent, when the ¡§ins¡¨ and the ¡§outs¡¨ are asymmetric with regard to labor market flexibility and monetary policy conduct. Our analysis also suggests that greater global exchange rate stability would be more likely to be obtained if the U.S. rather than the EU targeted the EUR/USD rate.

Keywords: Regional exhange 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: 2003-04
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Related works:
Working Paper: The Global Implications of Regional Exchange Rate Regines (2004)
Journal Article: The global implications of regional exchange rate regimes (2005)
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Persistent link: http://EconPapers.repec.org/RePEc:hkm:wpaper:082003

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