On the endogeneity of exchange rate regimes

Yeyati, Eduardo Levy; Sturzenegger, Federico; Reggio, Iliana

doi:10.1016/j.euroecorev.2009.12.004

Cited by 132 publications

(35 citation statements)

References 59 publications

(22 reference statements)

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“…Unsurprisingly, the results in Table 1 are similar to Wong and Chong (2014) and mirror the results in Levy Yeyati et al (2010). Inflation targeting is more likely to be adopted by countries with larger economic size, less open to both trade and capital flows, and weaker governments, which make it more difficult to sustain a pegged exchange rate under speculation.…”

Section: A First Pass At the Data With Propensity Score Matchingsupporting

confidence: 66%

“…Table 1 presents the typical estimations of the probability of inflation targeting adoption on a set of variables estimated by Probit model using short-run (column 1) and long-run data (column 2). 13 The set of variables used for estimation follows Wong and Chong (2014), which in turn adopts the theory-based variables suggested in Levy Yeyati et al (2010).…”

Section: A First Pass At the Data With Propensity Score Matchingmentioning

confidence: 99%

“…The estimation including the crisis variable on this sub-sample, nevertheless, reports a significant coefficient on the inflation targeting dummy and passes the corresponding two tests. 20 For example, see Levy-Yeyati et. al.…”

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confidence: 99%

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What Should Central Banks Target? Evidence on the Impact of Monetary Policy Regimes on Economic Growth

Wong

Chong

2015

SSRN Journal

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Abstract:Economists and policy-makers have long sought the ideal framework for monetary policy as it is arguably one of the most important tools for government to influence the economy.Exchange rate and inflation are believed to be the most appealing anchors for providing guidance to the conduct of monetary policy and are thus widely used in the real world. Most existing studies on the effect of exchange-rate arrangements and inflation targeting on economic growth suffer from the absence of a clear counterfactual, rendering it difficult to interpret their results. Based on a new classification scheme on monetary policy regimes, this paper helps to fill that gap by investigating the effect of monetary policy regimes on growth.Our results consistently support that an inflation targeting regime has a positive impact on economic growth when compared with an exchange-rate targeting regime. JEL Classifications: E42, E52, E58, F43

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Section: A First Pass At the Data With Propensity Score Matchingsupporting

confidence: 66%

Section: A First Pass At the Data With Propensity Score Matchingmentioning

confidence: 99%

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What Should Central Banks Target? Evidence on the Impact of Monetary Policy Regimes on Economic Growth

Wong

Chong

2015

SSRN Journal

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“…This is achieved by pegging a domestic currency to a reference currency of another country with stable macroeconomic conditions. A pegging country can gradually achieve a certain degree of synchronization with the reference country both in the level of the inflation rate as well as its dynamics (Jochem, 1999;Yeyati et al, 2010). country was on average above or below the inflation benchmark during the entire sample period.…”

Section: Hypothesis #1: a Price Stability-oriented Monetary Strategy mentioning

confidence: 99%

Dynamics and factors of inflation convergence in the European union

Brož

Kočenda

2018

Journal of International Money and Finance

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. We provide comprehensive evidence of the widespread occurrence of inflation convergence between all countries of the European Union from 1999 to 2016. We also show that convergence was more inclusive in the years after the global financial crisis-including the European sovereign debt crisis and the period of zero lower bound-and that price-stabilityoriented monetary strategies might have in fact facilitated this convergence. Our results are robust with respect to the use of three inflation benchmarks (the cross-sectional average, the inflation target of the European Central Bank, and the Maastricht criterion), structural breaks, and a core inflation measure. Our main findings imply that further enlargement of the euro area is feasible from the perspective of the convergence of inflation rates between the countries of the European Union. Terms of use: Documents in

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“…Based on the theory of the Optimal Currency Area (OCA) and on previous research (Heller 1978;Holden et al 1979 and1981;Edwards 2006;Levy Yeyati et al 2010) we may classify the variables that affect the choice of the exchange rate regime in two broad groups: economic and political. The first group includes: 16 a.…”

Section: The Choice Of the Exchange Rate Regimementioning

confidence: 99%

The role of the exchange rate regime in the process of real and nominal convergence

D'Adamo

Rovelli

2015

Journal of Macroeconomics

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. www.econstor.eu One general result is that B-S can at best explain only part of the excess inflation observed in the European catching-up countries, which suggests that other factors may be at play. In these and related studies, however, the potential role of the exchange rate regime in affecting price convergence in Europe has been overlooked. In this respect, we claim that the choice of the exchange rate regime has decisively affected the path of nominal convergence. To show this, we first model the (endogenous) choice of the exchange rate regime and, in a second stage, estimate a B-S type of regression for each regime. Our results show that, for countries which pegged to or adopted the euro, the effect of the same increase in the dual productivity growth (that is, the difference in productivity growth between the traded and nontraded sectors) on the dual inflation differential is more than twice as large as that in the "flexible" countries. We conclude that, in a catching-up country, premature euro adoption may foster excess inflation, beyond that which is to be expected as a consequence of productivity convergence on the basis of the B-S effect. Terms of use: Documents in D I S C U S S I O N P A P E R S E R I E SJEL Classification: C34, E52, F31

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On the endogeneity of exchange rate regimes

Abstract: In nv ve es st ti ig ga ac ci ió ón n e en n F Fi in na an nz za as s

Cited by 132 publications

References 59 publications

What Should Central Banks Target? Evidence on the Impact of Monetary Policy Regimes on Economic Growth

What Should Central Banks Target? Evidence on the Impact of Monetary Policy Regimes on Economic Growth

Dynamics and factors of inflation convergence in the European union

The role of the exchange rate regime in the process of real and nominal convergence

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