 How Fixed are Global Exchange Rates?Kevin O'Rourke and Roger Vicquery No 20138, CEPR Discussion Papers from Centre for Economic Policy Research Abstract: We present a new global index indicating how fixed are the world’s exchange rates. Our index measures the probability of two units of GDP, randomly selected anywhere in the world, of being involved in a fixed exchange rate arrangement. This approach is invariant to alternative classifications of the Eurozone and is able to account for both direct and indirect exchange rate linkages between countries. In contrast to the “New Consensus†view, which posits a continuity in exchange rate arrangements from the Bretton Woods era to the present, our index restores the conventional account of international monetary history over the last 70 years. Our findings indicate that global exchange rate fixity is now nearly three times smaller than prior to the 1971 Nixon shock, when major anchor currencies were pegged to each other. Furthermore, our measure partially puts into perspective the view that dollar dominance is now stronger than ever: we find that global anchoring to the US dollar was significantly more prevalent during Bretton Woods, particularly when accounting for indirect links. Keywords: Exchange rates; Fixed exchange rates; Floating exchange rates; Bretton Woods (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:cpr:ceprdp:20138 Ordering information: This working paper can be ordered from Access Statistics for this paper More papers in CEPR Discussion Papers from Centre for Economic Policy Research 33 Great Sutton Street, London EC1V 0DX, UK. |
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