How to exit from fixed exchange rate regimes?

Ahmet Atil Aşici, Nadezhda Ivanova, Charles Wyplosz*

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

1 Citation (Scopus)

Abstract

This paper improves upon the recently developed literature on exits from fixed exchange rate regimes in three ways: (1) It allows for two indicators for post-exit macroeconomic conditions, the change in the exchange rate and the change in the output gap; (2) it tests whether the distinction between orderly and disorderly exit is statistically justified, and concludes that it is not; (3) it deals with the sample selection problem. The results, subject to extensive sensitivity analysis, suggest that post-exits are better when depegging occurs in good macroeconomic conditions - an unnatural move for most policymakers - when world interest rates decline and in the presence of capital controls. Importantly, 'good' macroeconomic policies do not seem to help with post-exit performance.

Original languageEnglish
Pages (from-to)219-246
Number of pages28
JournalInternational Journal of Finance and Economics
Volume13
Issue number3
DOIs
Publication statusPublished - Jul 2008
Externally publishedYes

Keywords

  • Capital controls
  • Currency crises
  • Exchange rate policy
  • Exchange rate regimes
  • Macroeconomic policies

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