Exchange Rate Regime Durability and Performance in Developing Countries Versus Advanced Economies

Aasim M. Husain, Ashoka Mody and Kenneth S Rogoff

No 10673, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Drawing on new data and advances in exchange rate regimes' classification, we find that countries appear to benefit by having increasingly flexible exchange rate systems as they become richer and more financially developed. For developing countries with little exposure to international capital markets, pegs are notable for their durability and relatively low inflation. In contrast, for advanced economies, floats are distinctly more durable and also appear to be associated with higher growth. For emerging markets, our results parallel the Baxter and Stockman classic exchange regime neutrality result, though pegs are the least durable and expose countries to higher risk of crisis.

JEL-codes: F4 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba, nep-cwa and nep-ifn
Date: 2004-08
Note: EFG IFM ME
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