On the endogeneity of exchange rate regimes

Eduardo Levy Yeyati, Federico Sturzenegger and Iliana Reggio

European Economic Review, 2010, vol. 54, issue 5, 659-677

Abstract: The literature has identified three main approaches to account for the way exchange rate regimes are chosen: (i) the optimal currency area theory; (ii) the financial view, which highlights the consequences of international financial integration; and (iii) the political view, which stresses the use of exchange rate anchors as credibility enhancers in politically challenged economies. Using de facto and de jure regime classifications, we test the empirical relevance of these approaches separately and jointly. We find overall empirical support for all of them, although the incidence of financial and political aspects varies substantially between industrial and non-industrial economies. Furthermore, we find that the link between de facto regimes and their underlying fundamentals has been surprisingly stable over the years, suggesting that the global trends often highlighted in the literature can be traced back to the evolution of their natural determinants, and that actual policies have been less influenced by the frequent twist and turns in the exchange rate regime debate.

Keywords: Exchange; rates; Growth; Impossible; trinity; Dollarization; Capital; flows (search for similar items in EconPapers)
Date: 2010
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (83)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0014-2921(09)00125-1
Full text for ScienceDirect subscribers only

Related works:
Working Paper: On the endogeneity of exchange rate regimes (2009)
Working Paper: On the Endogeneity of Exchange Rate Regimes (2006)
Working Paper: On the Endogeneity of Exchange Rate Regimes (2002)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:eecrev:v:54:y:2010:i:5:p:659-677

Access Statistics for this article

European Economic Review is currently edited by T.S. Eicher, A. Imrohoroglu, E. Leeper, J. Oechssler and M. Pesendorfer

More articles in European Economic Review from Elsevier
Bibliographic data for series maintained by Catherine Liu ().