Real Exchange Rate Volatility and the Choice of Regimes in Emerging Markets
Temisan Agbeyegbe () and
Patrick Osakwe ()
No 404, Economics Working Paper Archive at Hunter College from Hunter College Department of Economics
Traditional models of the choice of exchange rate regimes ignore the destabilizing effects of sharp and unanticipated exchange rate movements. Recent research, however, has shown that these movements have real costs in emerging markets owing to the dollarization of liabilities. This paper evaluates the performance of an emerging market economy under a credibly fixed-rate, a collapsing fixed-rate, and a flexible-rate regime using a speculative attack model that takes into account the real effects of unanticipated movements in exchange rates. The model is applied to South Korea to determine the dominant exchange rate regime.
Keywords: Exchange rate regimes; Output volatility; Dollarization; South Korea (search for similar items in EconPapers)
JEL-codes: E52 F31 F41 (search for similar items in EconPapers)
Pages: 28 pages
Date: 2004, Revised 2004
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Journal Article: Real exchange rate volatility and the choice of regimes in emerging markets (2005)
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Persistent link: https://EconPapers.repec.org/RePEc:htr:hcecon:404
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