The Choice of Exchange Rate Regime in Emerging-Market and Transition Economies

Stæhr, Karsten

doi:10.1007/978-1-137-37138-6_5

Cited by 4 publications

(1 citation statement)

References 61 publications

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“…This scheme is relevant insofar as giving up an independent monetary policy to tackle macroeconomic imbalances is less costly if the candidate countries face similar shocks (Padilla & Rodríguez, 2021). Indeed, highly asymmetric shocks imply a floating exchange rate might play the corrective role of shock absorber; otherwise, the exchange rate might lead to critical macroeconomic costs (Hochreiter et al, 2003), say, large fluctuations in production and output due to the disagreement on the interest rate-setting (Staehr, 2015).…”

Section: Literature Overviewmentioning

confidence: 99%

Shock Symmetry and Business Cycle Synchronization: Is Monetary Unification Feasible among CAPADR Countries?

Baca¹

2021

Preprint

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In light of the ongoing integration efforts, the question of whether CAPADR economies may benefit from a single currency arises naturally. This paper examines the feasibility of an Optimum Currency Area (OCA) within seven CAPADR countries. We estimate SVAR models to retrieve demand and supply shocks between 2009:01 -2020:01 and determine their extent of symmetry. We then go on to compute two regional indicators of dispersion and the cost of inclusion into a hypothetical OCA for each country. Our results indicate that asymmetric shocks tend to prevail. In addition, the dispersion indexes show that business cycles have become more synchronous over time. However, CAPADR countries are still sources of cyclical divergence, so that they would incur significant costs in terms of cycle correlation whenever they pursue currency unification. We conclude that the region does not meet the required symmetry and synchronicity for an OCA to be appropiate. ResumenDados los esfuerzos de integración actuales, cabe preguntarse si las economías CAPARD pueden beneficiarse de un sistema de moneda única. Este documento analiza la factibilidad de una Zona Monetaria Óptima (ZMO) entre siete economías CAPARD. Se estiman modelos SVAR para extraer choques de oferta y demanda durante 2009:01 -2020:01 y determinar su nivel de simetría. Posteriormente, se calculan dos indicadores regionales de dispersión y el costo de incorporación a una ZMO hipotética para cada país. Los resultados sugieren que los choques de naturaleza asimétrica predominan. En adición, los índices de dispersión reflejan que los ciclos económicos muestran una tendencia creciente de sincronización. Sin embargo, los países CAPARD aún constituyen fuentes de divergencia cíclica, de forma que incurrirían en costos significativos en términos de correlación cíclica si persiguen la unión monetaria. Se concluye que la región no muestra la simetría y sincronización requeridas para que una ZMO sea apropiada.

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Section: Literature Overviewmentioning

confidence: 99%

Shock Symmetry and Business Cycle Synchronization: Is Monetary Unification Feasible among CAPADR Countries?

Baca¹

2021

Preprint

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Current account drivers and exchange rate regimes in Central and Eastern Europe

Harkmann

Stæhr

2021

Journal of International Money and Finance

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Türki̇ye’de Kur Reji̇mleri̇ Ve Ekonomi̇k Büyüme İli̇şki̇si̇: Kalman Fi̇ltresi̇ İle Bi̇r Uygulama

Koç¹

2021

Erciyes Üniversitesi İktisadi Ve İdari Bilimler Fakültesi Dergisi

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In parallel with the impact of globalization on the real and financial sectors, both product supply chains and financial markets are rapidly integrated across the world. With this integration, the exchange rate becomes even more important for all countries in the context of international trade and portfolio investments. Since the end of the 1970s, most of the countries have left the fixed exchange rate regimes and began to use flexible exchange rate regimes. In this study, our aim is to investigate the relationship between exchange rate regimes and economic growth for the 1960 -2019 period, through a model for Turkey. In the model Kalman filter is applied and the path of the time varying coefficients are observed. In the study, the time varying values of the coefficients point to the results that fixed and managed exchange rate regimes do not have a significant effect on economic growth, while flexible exchange rate regimes affect economic growth negatively.

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The Choice of Exchange Rate Regime in Emerging-Market and Transition Economies

Cited by 4 publications

References 61 publications

Shock Symmetry and Business Cycle Synchronization: Is Monetary Unification Feasible among CAPADR Countries?

Shock Symmetry and Business Cycle Synchronization: Is Monetary Unification Feasible among CAPADR Countries?

Current account drivers and exchange rate regimes in Central and Eastern Europe

Türki̇ye’de Kur Reji̇mleri̇ Ve Ekonomi̇k Büyüme İli̇şki̇si̇: Kalman Fi̇ltresi̇ İle Bi̇r Uygulama

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