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Exchange-rate regimes and inflation: An empirical evaluation

Simon Sosvilla-Rivero () and María del Carmen Ramos-Herrera
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María del Carmen Ramos-Herrera: Department of Quantitative Economics, Universidad Complutense de Madrid

No 14-02, Working Papers from Asociación Española de Economía y Finanzas Internacionales

Abstract: Based on a dataset of 123 economies, both developed and developing countries, this paper investigates the relation between exchange-rate regimes and inflation performance. Our results suggest that those countries with flexible exchange-rate regimes are characterized by higher inflation rates, while the smaller inflation rates are associated with fixed exchange rates and countries with intermediate regimes occupy an intermediate position in their records of inflation rates. These results are maintained when we analyze the countries by income level, except for the case of upper income countries, where we do not find significant differences between fixed and intermediate regimes in inflation performance.

Keywords: Exchange rate regime; inflation rates (search for similar items in EconPapers)
JEL-codes: E42 F31 (search for similar items in EconPapers)
Pages: 18 pages
Date: 2014-02
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