Exchange rate regime durability and performance in developing versus advanced economies

Aasim M. Husain, Ashoka Mody, Kenneth S. Rogoff

Research output: Contribution to journalArticlepeer-review

139 Scopus citations

Abstract

Drawing on new data and advances in exchange rate regimes' classification, we find that countries appear to benefit by having increasingly flexible exchange rate systems as they become richer and more financially developed. For developing countries with little exposure to international capital markets, pegs are notable for their durability and relatively low inflation. In contrast, for advanced economies, floats are distinctly more durable and also appear to be associated with higher growth. For emerging markets, our results parallel the Baxter and Stockman classic exchange regime neutrality result, though pegs are the least durable and expose countries to higher risk of crisis.

Original languageEnglish (US)
Pages (from-to)35-64
Number of pages30
JournalJournal of Monetary Economics
Volume52
Issue number1
DOIs
StatePublished - Jan 2005
Externally publishedYes

All Science Journal Classification (ASJC) codes

  • Finance
  • Economics and Econometrics

Keywords

  • Classification
  • Durability
  • Exchange rate regimes
  • Performance

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