Better Two Eyes than One: A Synthesis Classification of Exchange Rate Regimes

Cécile Couharde () and Carl Grekou

Working Papers from CEPII research center

Abstract: This paper proposes a new de facto classification of exchange rate regimes, the synthesis classification. The proposed framework has several advantages over existing de facto classifications. First, it offers a unified framework based on the most divergent classifications, the RR and LYS classifications, leading not only to a broader coverage but also to encompass a broad spectrum of exchange systems. Second, it fits better with the known history of exchange rate regimes developments in the post-Bretton Woods era. Among others, it brings an interesting nuance to the so-called hollowing-out hypothesis by showing that the evolution of de facto regimes —especially in emerging economies since the late 1990s— has essentially involved movement toward more tightly “managed” intermediate regimes and not a shift away from such regimes. As an illustration of the insightfulness of our classification, we empirically revisit the nexus between currency crises and exchange rate regimes. In addition to associate a higher probability of currency crisis to both intermediate and floating regimes, our classification, also displays better statistical performances than other classifications in predicting currency crises.

Keywords: Currency crisis; De facto classifications; Exchange rate regimes; Probit model; ROC analysis (search for similar items in EconPapers)
JEL-codes: E52 F33 F4 O24 (search for similar items in EconPapers)
Date: 2021-10
New Economics Papers: this item is included in nep-cba, nep-mac, nep-mon and nep-opm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Related works:
Journal Article: Better two eyes than one: A synthesis classification of exchange rate regimes (2024)
Working Paper: Better two eyes than one: A synthesis classification of exchange rate regimes (2022)
Working Paper: Better two eyes than one: A synthesis classification of exchange rate regimes (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:cii:cepidt:2021-07

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