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N° 2002-07 |
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| July |
| The Survival of Intermediate Exchange
Rate Regimes |
Agnès Bénassy-Quéré
Benoît Cœuré |
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| We propose a model of exchange-rate regime
choice which accounts for the existence of a continuous range of regimes, the
need for real exchange-rate adjustment in response to shocks, the existence of
capital account shocks and of balance-sheet effects, the sensitivity of prices
to the nominal exchange rate, and the need for a commitment to make any given
regime sustainable. Non-ordered Logit estimations on a cross-section sample of
126 emerging and developed countries before and after 1997-1998 currency crises
broadly support our approach.. Specifically, we find that there is still a case
for intermediate regimes in countries where the interest rate channel is weaker
and which do not depend too much on commodities. The empirical model correctly
predicts up to 83% of observed exchange rate regimes, and the recent "hollowing
out" of intermediate regimes. It also provides a benchmark to assess the
recent changes in individual exchange rate regimes. |
Abstract |
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| Exchange rate regime, Developing countries,
Logit model |
Keywords |
| F33 |
JEL classification |
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