Systematic Managed Floating

Abstract

discussant comments at the AMPF conference. Tables 2.1-2.4 draw on new joint research with Danxia Xie. Faults of the paper are the author's alone. The views expressed herein are those of the author and do not necessarily reflect the views of the National Bureau of Economic Research. The author has disclosed a financial relationship of potential relevance for this research. Further information is available online at http://www.nber.org/papers/w23663.ack NBER working papers are circulated for discussion and comment purposes. They have not been peer-reviewed or been subject to the review by the NBER Board of Directors that accompanies official NBER publications.

International capital flow pressures and global factors

“…This variation reinforces the importance of our approach towards accounting for the different components of the EM P in any cross country time series analysis, including around understanding the importance of the global factor and viability of toolkits. The evidence also warns against general assumptions that the majority of countries either maintain fully flexible exchange rates or pegs, with our results consistent with evidence in Frankel (2019) Second, we revisit the literature on currency risk sensitivities and safe haven currency status.…”

“…In addition, it shows the prevalence of mainly floaters (here considered as those currencies with exchange rate change contributions in excess of 90 percent of total EM P ) versus countries that manage their exchange rate more actively (where the exchange rate contribution to the EM P is below 10 percent). The strong weight in the center category of diverse contributions to the EM P resonates with the arguments of Frankel (2019), who used foreign exchange reserve changes as a percentage of base money compared with observed currency appreciations against USD to classify many countries as systematic managed floaters.…”

“…EM P indices are weighted and scaled sums of exchange rate depreciation, official foreign exchange intervention, and policy rate changes. Earlier versions of exchange market pressure indices have been used in a broad range of applications in the literature, from studying balance of payments crises (Eichengreen, Rose and Wyplosz 1994) to monetary policy spillovers (Aizenman, Chinn and Ito 2016b) and classifying exchange rate regimes (Frankel 2019). However, the weighting and scaling of the inputs have problematic features, leading those indices to mischaracterize the patterns of pressures across countries and over time, as discussed more extensively in the Appendix.…”

Analyzing Exchange Market Pressure Dynamics with Markov Regime Switching: The Case of Turkey

“…Furthermore, when capital outflows increase, they step into the foreign exchange market to limit the macro-financial risks from depreciation pressures (Blanchard et al, 2015). Therefore, managed floating has become the standard for many EMEs in the post-crisis era, whether they have adopted inflation targeting or not 2 (Frankel, 2019).…”

Foreign Exchange Intervention: A New Database

“…Much of the new attention towards FX interventions is due to the increased relevance of emerging markets in the world economy, where interventions are quite frequently used (Menkhoff, 2013;Frankel, 2019), while central banks in the US, the Euro area or the UK hardly intervene any more.…”