Rethinking Exchange Rate Regimes

Ethan Ilzetzki, Carmen Reinhart and Kenneth Rogoff

No 16722, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: This paper employs an updated algorithm and database for classifying exchange rate and anchor currency choice, to explore the evolution of the global exchange rate system, including parallel rates, capital controls and reserves. In line with a large recent literature, we find that the dollar has become ever-more central as the de facto anchor or reference currencies for much of the world. Our discussion encompasses the history of anchor currency choice, methods for classifying exchange rate regimes, a detailed discussion of the evolution of regimes, the growing substitution of reserves for capital controls as a tool for exchange rate stabilization, the modern Triffin dilemma, and the surprising recent trend decline in volatility of exchange rates at the core of the system. It concludes with issues surrounding the rise of China.

Keywords: Exchange rate regimes; International monetary system; Capital controls; Anchor currencies; Exchange rate volatility; Triffin dilemma (search for similar items in EconPapers)
JEL-codes: E5 F3 F4 N2 (search for similar items in EconPapers)
Date: 2021-11
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