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Exploring different views of exchange rate regime choice

Fabrizio Carmignani (), Emilio Colombo () and Patrizio Tirelli ()

Journal of International Money and Finance, 2008, vol. 27, issue 7, 1177-1197

Abstract: The empirical distinction between de facto and de jure exchange rate regimes raises a number of interesting questions. Which factors may induce a de facto peg? Why do countries enforce a peg but do not announce it? Why do countries "break their promises"? We show that a stable socio-political environment and an efficient political decision-making process are a necessary prerequisite for choosing a peg and sticking to it, challenging the view that sees the exchange rate as a commitment device. Policymakers seem rather concerned with regime sustainability in the face of adverse economic and socio-political fundamentals.

Keywords: Exchange; rate; regimes; de; facto; classification; Credibility; Consistency (search for similar items in EconPapers)
Date: 2008
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