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Pegging emerging currencies in the face of dollar swings

Virginie Coudert (), Cécile Couharde and Valérie Mignon ()

Working Papers from CEPII research center

Abstract: The aim of this paper is to study ruptures of exchange-rate pegs by focusing on the fluctuations of the anchor currency. We test for the hypothesis that currencies linked to the USD are more likely to loosen their peg when the USD is appreciating, while sticking to it otherwise. To this end, we estimate smooth-transition regression models for a sample of 28 emerging currencies over the 1994-2011 period. Our findings show that while the real effective exchange rates of most of these countries tend to co-move with that of the USD in times of depreciation, this relationship is frequently reversed when the US currency appreciates over a certain threshold. Such nonlinear effects are especially at stake in Asia where growth is export-oriented.

Keywords: real exchange rates; anchor currency; rupture of pegs; smooth transition regression models (search for similar items in EconPapers)
JEL-codes: C22 F31 F33 (search for similar items in EconPapers)
Date: 2012-10
New Economics Papers: this item is included in nep-mon and nep-opm
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Related works:
Journal Article: Pegging emerging currencies in the face of dollar swings (2013) Downloads
Working Paper: Pegging emerging currencies in the face of dollar swings (2013)
Working Paper: Pegging emerging currencies in the face of dollar swings (2013)
Working Paper: Pegging emerging currencies in the face of dollar swings (2013)
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