Does the Nominal Exchange Rate Regime Matter?

Ghosh, Atish R.; Gulde, Anne-Marie; Ostry, Jonathan D.; Wolf, Holger C.

doi:10.3386/w5874

Cited by 290 publications

(244 citation statements)

References 0 publications

Supporting

Mentioning

208

Contrasting

Unclassified

Order By: Relevance

“…Among the trilemma variables, higher exchange rate stability is associated with lower inflation for both developing and emerging market countries, a result consistent with the literature (such as Ghosh et al 1997). This finding and the previously found positive association between exchange rate stability and output volatility are in line with the theoretical prediction that establishing stable exchange rates is a trade-off issue for policymakers; it will help the country to achieve lower inflation by showing a higher level of credibility and commitment, but at the same time, the efforts of maintaining stable exchange rates will rid the policymakers of an important adjustment mechanism through fluctuating exchange rates -which would explain the negative coefficient on monetary independence in the output volatility regressions.…”

Section: Medium-run Level Of Inflationsupporting

confidence: 80%

The Financial Crisis, Rethinking of the Global Financial Architecture, and the Trilemma

Aizenman¹,

Chinn²,

Ito³

2012

Monetary and Currency Policy Management in Asia

View full text Add to dashboard Cite

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. Terms of use: Documents in Asian Development Bank InstituteThe Working Paper series is a continuation of the formerly named Discussion Paper series; the numbering of the papers continued without interruption or change. ADBI's working papers reflect initial ideas on a topic and are posted online for discussion. ADBI encourages readers to post their comments on the main page for each working paper (given in the citation below). Some working papers may develop into other forms of publication. This paper was prepared for the ADBI conference: "Global Financial Crisis: Macroeconomic Policy Issues" on 28-29July 2009. The authors thank Yung Chul Park, Masahiro Kawai, Shinji Takagi, Ajay Shah, Shin-ichi Fukuda, and the participants at the conference for their useful comments and suggestions. The financial support of faculty research funds of the UCSC, UW-Madison, and PSU is gratefully acknowledged. This paper was drafted when Mr. Ito was visiting ADBI; thanks go to ADBI for its hospitality and financial support.The views expressed in this paper are the views of the authors and do not necessarily reflect the views or policies of ADBI, the Asian Development Bank (ADB), its Board of Directors, or the governments they represent. ADBI does not guarantee the accuracy of the data included in this paper and accepts no responsibility for any consequences of their use. Terminology used may not necessarily be consistent with ADB official terms.Asian Development Bank Institute Kasumigaseki Building 8F 3-2-5 Kasumigaseki, Chiyoda-ku Tokyo 100-6008, JapanTel:+81-3-3593-5500 Fax:+81-3-3593-5571 URL:www.adbi.org E-mail: info@adbi.org AbstractThis paper extends our previous paper (Aizenman, Chinn, and Ito 2008) and explores some of the unexplored questions. First, we examine the channels through which the trilemma policy configurations affect output volatility. Secondly, we investigate how trilemma policy configurations affect the output performance of the economies under severe crisis situations. Thirdly, we look into how trilemma configurations have evolved in the aftermath of economic crises in the past. We find that trilemma policy configurations and external finances affect output volatility mainly through the investment channel. While a higher degree of exchange rate stability could stabilize the real exchange rate movement, it could also make investment volatile, though the volatility-enhancing effect of exchange rate stability on investment can be cancelled by holding hi...

show abstract

Section: Medium-run Level Of Inflationsupporting

confidence: 80%

The Financial Crisis, Rethinking of the Global Financial Architecture, and the Trilemma

Aizenman¹,

Chinn²,

Ito³

2012

Monetary and Currency Policy Management in Asia

View full text Add to dashboard Cite

show abstract

“…Ghosh, Gulde, Ostry and Wolf (1997) pursue this idea when they examine the impact of exchange rate regimes on fiscal performance, inflation and real variables, going beyond a simple de jure classification of exchange rate regimes. 3 Frieden et al (1998) also modify the standard IFS classification in order to account for frequent adjusters and for different types of crawls.…”

Section: Motivationmentioning

confidence: 99%

Classifying exchange rate regimes: Deeds vs. words

Levy-Yeyati

Sturzenegger

2005

European Economic Review

649

234

View full text Add to dashboard Cite

Most of the empirical literature on the relative merits of alternative exchange rate regimes uses the IMF de jure classification based on the regime that governments claim to have, abstracting from the fact that many countries that in theory follow flexible regimes intervene in the exchange market to an extent that in practice makes them indistinguishable from fixed rate regimes, and vice versa. To address this problem, in this paper we construct a de facto classification of exchange rate regimes. Using cluster analysis techniques, we group different regimes according to their behavior along three classification dimensions: the nominal exchange rate, changes in the nominal exchange rate, and international reserves. We compare our results with the IMF classification, and discuss the main discrepancies. The paper provides an exchange rate classification for each country and each year during the period 1990-1998 which is readily available for downloading at

show abstract

“…De facto regimes may be characterized by more or less exchange rate volatility than expected on the basis of official regimes, and these discrepancies may last for substantial periods of time. As shown by Gosh et al (1997), frequent adjustments of the central parity can make an officially pegged exchange rate quite flexible. Calvo and Reinhart (2000) show that many countries that officially adopt floating exchange rates use frequent foreign exchange market interventions to maintain a high degree of exchange rate stability, a phenomenon they call "fear of floating".…”

Section: Introductionmentioning

confidence: 99%