Explaining the Transition Between Exchange Rate Regimes
Paul Masson () and
Francisco Ruge-Murcia ()
Cahiers de recherche from Universite de Montreal, Departement de sciences economiques
This paper studies the transition between exchange rate regimes using a Markov chain model with time-varying transition probabilities. The probabilities are parameterized as nonlinear functions of variables suggested by the currency crisis and optimal currency area literature. Results using annual data indicate that inflation, and to a lesser extent, output growth and trade openness help explain the exchange rate regime transition dynamics.
Keywords: Exchange rates; hollowing out hythesis; regime change; Markov chains; gs; floating (search for similar items in EconPapers)
JEL-codes: F33 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba and nep-ifn
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Working Paper: Explaining the Transition Between Exchange Rate Regimes (2003)
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Persistent link: https://EconPapers.repec.org/RePEc:mtl:montde:2003-21
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