Divergence from de jure exchange rate regime: a stochastic process of learning

Monzur Hossain ()

Applied Economics Letters, 2009, vol. 16, issue 5, 475-479

Abstract: This article provides a model framework to characterize the process of stochastic learning during the period of divergence from a de jure currency regime. The model outcome shows that divergence from a de jure regime is a process of slow learning in small steps, which indicates that the learning completes over time. Therefore, divergence does not have a long-term effect on the distribution of exchange rate regime. Empirical illustration indicates that countries work toward the development of their financial sector during the period of divergence.

Date: 2009
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Persistent link: https://EconPapers.repec.org/RePEc:taf:apeclt:v:16:y:2009:i:5:p:475-479

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DOI: 10.1080/17446540802277146

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