 How Do Fixed-Exchange-Rates Regimes Work? The Evidence from the Gold Standard, Bretton Woods and the EMSAlberto Giovannini No 282, CEPR Discussion Papers from Centre for Economic Policy Research Abstract: This paper discusses the institutional aspects and the empirical evidence in favor of the hypothesis that fixed exchange rate regimes work asymmetrically, with one country providing the nominal anchor for the whole system. I derive the observable implications of the 'asymmetry' hypothesis using a standard model of fixed exchange rates in which the center-country pegs the nominal interest rate, but disregards fluctuations in foreign exchange reserves, while the other countries target their foreign exchange reserves. In equilibrium, countries at the periphery accommodate fully the center-country's policies. Furthermore, all idiosyncratic shocks are fully reflected in the interest rates of the countries at the periphery, but do not affect the center-country's interest rate. I then examine the empirical evidence in support of the asymmetry hypothesis which is drawn both from the study of interest-rate behavior around some well-known episodes of international portfolio disturbances, and from the analysis of the stochastic implications of the model in section 4 of the paper. Keywords: Bretton Woods; European Monetary System; Fixed Exchange Rates; Gold Standard (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:282 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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