Herding and the shifting determinants of exchange rate regime choice

Jesse Russell

Applied Economics, 2012, vol. 44, issue 32, 4187-4197

Abstract: It is difficult to pin down the factors that determine states’ choice of exchange rate regime because those very factors present a moving target. Many scholars have taken on the same question: what are the determinants of exchange rate regime choice? But as a group they have been unable to identify a stable answer. The reason for this is that the factors that best predict exchange rate regime vary dramatically across time. An explanation for this variation is offered: rational herding, or information cascades, can explain why one factor becomes prominent for a period of time then suddenly drops off and is replaced by a better predictor.

Date: 2012
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DOI: 10.1080/00036846.2011.587785

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