The Determinants of Exchange Rate Flexibility: An Empirical Investigation

Holden, Paul; Holden, Merle; Suss, Esther C.

doi:10.2307/1926061

Cited by 76 publications

(42 citation statements)

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“…Apart from Holden et al (1979) and Poirson (2001), existing empirical studies of exchange rate regime choice have focused on official rather than de facto regimes. 2 The present paper takes a positive approach to explaining exchange rate regime discrepancies.…”

Section: Introductionmentioning

confidence: 99%

De facto and official exchange rate regimes in transition economies

Hagen

Zhou

2005

Economic Systems

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Section: Introductionmentioning

confidence: 99%

De facto and official exchange rate regimes in transition economies

Hagen

Zhou

2005

Economic Systems

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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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“…Among the first studies of this kind are Heller (1978), who analyzed the determinants of exchange rate regimes with data from the mid-1970s, soon after the generalized floating that followed the breakup of the Bretton Woods system, Dreyer (1978), Holden, Holden, and Suss (1979), Melvin (1985), Bosco (1987), Savvides (1990), Cuddington andOtoo (1990 and1991), Rizzo (1998), andPoirson (2001). Some studies, such as those by Collins (1996), Edwards (1996 and1998) and, more recently, Frieden, Ghezzi, and Stein (2000), have used random effects panel data to analyze also the determinants of changes in exchange rate regime.…”

Section: Empirical Findings On Factors Affecting Regime Choicementioning

confidence: 99%

“…A few studies have constructed and used measures of the degree of de facto flexibility on the basis of the actual observed volatility of exchange rates and reserves, including Holden, Holden, and Suss (1979) and, more recently, Poirson (2001). Table 4 summarizes the approaches and findings of these studies with regard to the impact of several variables on observed exchange rate regime choice.…”

Section: Empirical Findings On Factors Affecting Regime Choicementioning

confidence: 99%

Evolution and Performance of Exchange Rate Regimes

Husain

Mody²,

Oomes³

et al. 2003

IMF Working Papers

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This Working Paper should not be reported as representing views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate.Using recent advances in the classification of exchange rate regimes, this paper finds no support for the popular bipolar view that countries will tend over time to move to the polar extremes of free float or rigid peg. Rather, intermediate regimes have shown remarkable durability. The analysis suggests that as economies mature, the value of exchange rate flexibility rises. For countries at a relatively early stage of financial development and integration, fixed or relatively rigid regimes appear to offer some anti-inflation credibility gain without compromising growth objectives. As countries develop economically and institutionally, there appear to be considerable benefits to more flexible regimes. For developed countries that are not in a currency union, relatively flexible exchange rate regimes appear to offer higher growth without any cost in credibility.JEL Classification Numbers: F4, F33, E3

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The Determinants of Exchange Rate Flexibility: An Empirical Investigation

Cited by 76 publications

References 1 publication

De facto and official exchange rate regimes in transition economies

De facto and official exchange rate regimes in transition economies

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

Evolution and Performance of Exchange Rate Regimes

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