Exchange rate regime transitions /

Exchange rate regime transitions /

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Bibliographic Details
Author / Creator:	Masson, Paul R.
Imprint:	[Washington, D.C.] : International Monetary Fund, Research Dept., ©2000.
Description:	1 online resource (17 pages).
Language:	English
Series:	IMF working paper ; WP/00/134 IMF working paper ; WP/00/134.
Subject:	Foreign exchange rates -- Econometric models. Foreign exchange rates -- Econometric models.
Format:	E-Resource Book
URL for this record:	http://pi.lib.uchicago.edu/1001/cat/bib/12496786

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Other authors / contributors:	International Monetary Fund. Research Department.
ISBN:	1451900783 9781451900781 1282106783 9781282106789
Notes:	Includes bibliographical references (page 17). Restrictions unspecified Electronic reproduction. [S.l.] : HathiTrust Digital Library, 2010. Master and use copy. Digital master created according to Benchmark for Faithful Digital Reproductions of Monographs and Serials, Version 1. Digital Library Federation, December 2002. http://purl.oclc.org/DLF/benchrepro0212 digitized 2010 HathiTrust Digital Library committed to preserve Print version record.
Summary:	Some have argued that the only sustainable regimes are free floating and hard exchange rate commitments-essentially currency boards or monetary unions (Eichengreen, 1994, 1998; Obstfeld and Rogoff, 1995). For instance, Eichengreen (1994, pp. 4-5) says that " ... contingent policy rules to hit explicit exchange rate targets will no longer be viable in the twenty-first century ... Countries ... will be forced to choose between floating exchange rates on the one hand and monetary unification on the other." Similarly, Obstfeld and Rogoff (1995, pp. 74) state " ... there is little, if any, comfortable middle ground between floating rates and the adoption of a common currency." Hence, in the view of these authors, in the future we will see a disappearance of the middle ground that corresponds to soft commitments to some sort of intermediate exchange rate regime-adjustable pegs, crawling pegs, or bands, and perhaps also managed floating. This view is sometimes called the "two poles" or "hollowing out" (e.g., Eichengreen, 1994, pp. 6) theory of exchange rate regimes, and is based on the observation that higher capital mobility makes exchange rate commitments increasingly fragile. However, like the optimal currency area literature, which is essentially static, an explicit or implicit assumption is made that regimes are chosen to last forever, and from this perspective, one would only choose a regime that could be sustained once and for all. Only the hardest peg and the absence of any exchange rate commitment whatsoever are likely to qualify on that basis. Thus Eichengreen (1994, pp. 5), states "This will rule out the maintenance for extended periods of pegged but adjustable exchange rates, crawling pegs, and other regimes in which governments pre-announce limits on exchange rate fluctuations ..." (italics added).
Other form:	Print version: Masson, Paul R. Exchange rate regime transitions. [Washington, D.C.] : International Monetary Fund, Research Dept., ©2000

Description
Summary:	The "hollowing-out," or "two poles" hypothesis is tested in the context of a Markov chain model of exchange rate transitions. In particular, two versions of the hypothesis--that hard pegs are an absorbing state, or that fixes and floats form a closed set, with no transitions to intermediate regimes--are tested using two alternative classifications of regimes. While there is some support for the lack of exits from hard pegs (i.e., that they are an absorbing state), the data generally indicate that the intermediate cases will continue to constitute a sizable proportion of actual exchange rate regimes.
Physical Description:	1 online resource (17 pages).
Format:	Master and use copy. Digital master created according to Benchmark for Faithful Digital Reproductions of Monographs and Serials, Version 1. Digital Library Federation, December 2002.
Bibliography:	Includes bibliographical references (page 17).
ISBN:	1451900783 9781451900781 1282106783 9781282106789