publication . Preprint . 2001

How Do Countries Choose their Exchange Rate Regime?

Helene Poirson Ward;
Open Access
  • Published: 01 May 2001
This paper investigates the determinants of exchange rate regime choice in 93 countries during 1990-98. Cross-country analysis of variations in international reserves and nominal exchange rates shows that (i) truly fixed pegs and independent floats differ significantly from other regimes and (ii) significant discrepancies exist between de jure and de facto flexibility. Regression results highlight the influence of political factors (political instability and government temptation to inflate), adequacy of reserves, dollarization (currency substitution), exchange rate risk exposure, and some traditional optimal currency area criteria, in particular capital mobilit...
free text keywords: General, [Developing countries;Dollarization;Exchange rates;Exchange rate regimes;Monetary unions;optimal currency areas, exchange rate, exchange rate regime, exchange rate risk, exchange rate flexibility, International Monetary Arrangements and Institutions, International Policy Coordination and Transmission, Economic Development]
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