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Global Financial Cycles and the Exchange Rate Regime: A Perspective from Emerging Markets

Maurice Obstfeld, Jonathan Ostry () and Mahvash Qureshi

No 12696, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: This paper examines the relevance of exchange rate regimes in the transmission of global financial shocks to domestic financial and macroeconomic conditions. Our findings suggest that even in today's highly financially integrated world, the nominal exchange rate regime does matter-at least for emerging market economies. The transmission of global financial shocks to domestic variables is magnified under fixed exchange rate regimes relative to more flexible regimes. For advanced economies, however, the jury is still out, as the recent paucity of truly fixed regimes among these economies poses a challenge for estimating the effect of exchange rate flexibility.

Keywords: emerging market economies; global financial cycle; trilemma (search for similar items in EconPapers)
JEL-codes: F31 F36 F41 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ifn and nep-opm
Date: 2018-02
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