Fear of Floating and Pegging: A Simultaneous Choice Model of De Jure and De Facto Exchange Rate Regimes in Developing Countries

Hagen, Jürgen von; Zhou, Jizhong

doi:10.1007/s11079-009-9117-9

Cited by 5 publications

(2 citation statements)

References 17 publications

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“…40 The inclusion of a measure of central bank independence reduced the sample size to just 35 countries, but it was in fact significant and negative. Some scholars argue that countries that want to stabilize the real value of their foreign debt service payments will prefer fixed exchange rates (e.g., Shambaugh 2004;von Hagen and Zhou 2006;Walter 2008). It is also possible that central bank independence and fixed rates are imperfectly credible institutions with the same goal, and therefore may complement each other (Bodea n.d.).…”

Section: Robustnessmentioning

confidence: 99%

“…It is also possible that central bank independence and fixed rates are imperfectly credible institutions with the same goal, and therefore may complement each other (Bodea n.d.). Some scholars argue that countries that want to stabilize the real value of their foreign debt service payments will prefer fixed exchange rates (e.g., Shambaugh 2004; von Hagen and Zhou 2006; Walter 2008). A measure of total external debt, however, was not significant.…”

Section: Empirical Analysismentioning

confidence: 99%

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Migrant Remittances and Exchange Rate Regimes in the Developing World

Singer

2010

Am Polit Sci Rev

123

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This article argues that the international financial consequences of immigration exert a substantial influence on the choice of exchange rate regimes in the developing world. Over the past two decades, migrant remittances have emerged as a significant source of external finance for developing countries, often exceeding conventional sources of capital such as foreign direct investment and bank lending. Remittances are unlike nearly all other capital flows in that they are stable and move countercyclically relative to the recipient country's economy. As a result, they mitigate the costs of forgone domestic monetary policy autonomy and also serve as an international risk-sharing mechanism for developing countries. The observable implication of these arguments is that remittances increase the likelihood that policy makers adopt fixed exchange rates. An analysis of data onde factoexchange rate regimes and a newly available data set on remittances for up to 74 developing countries from 1982 to 2006 provides strong support for these arguments. The results are robust to instrumental variable analysis and the inclusion of multiple economic and political variables.

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Section: Robustnessmentioning

confidence: 99%

Section: Empirical Analysismentioning

confidence: 99%

Migrant Remittances and Exchange Rate Regimes in the Developing World

Singer

2010

Am Polit Sci Rev

123

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Exchange Rate Regimes and Business Cycles: An Empirical Investigation

Erdem

Özmen

2015

Open Econ Rev

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This paper empirically investigates the impacts of domestic and external factors along with exchange rate regimes (ERRs) on business cycles in a large panel of advanced and emerging market economies (EME). The results for classical business cycles suggest that EME tend to experience much deeper recessions and relatively steeper expansions during almost the same duration. The probability of expansions significantly increases with ERR flexibility. Our results strongly support floating ERR for both advanced and EME other than the East Asian countries. The impacts of external real and financial shocks and domestic variables are significantly greater under managed regimes as compared to floats. Consistent with an argument that high saving rates enhance the ability of a country to maintain an ERR, managed regimes performs better only in the East Asian countries. Supporting the de-coupling literature, external cycles become insignificant for growth under flexible ERR. Our results strongly suggest that the evolution and determinants of both classical business and growth cycles are not invariant to the prevailing ERR.

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