How Do Countries Choose Their Exchange Rate Regime?

By H. Poirson. Social Science Research Network, 2001

191 citations recorded by the source corpus.

This paper investigates the determinants of exchange rate regime choice in 93 countries during 1990-98. Cross-country analysis of variations in international reserves and nominal exchange rates shows that (i) truly fixed pegs and independent floats differ significantly from other regimes and (ii) significant discrepancies exist between de jure and de facto flexibility. Regression results highlight the influence of political factors (political instability and government temptation to inflate), adequacy of reserves, dollarization (currency substitution), exchange rate risk exposure, and some traditional optimal currency area criteria, in particular capital mobility, on exchange rate regime selection.

Subfields: Economics and Econometrics, Finance

View Paper: https://www.semanticscholar.org/paper/7b7e96217e147d17e2841dfc97a816eaecb81297

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Citations in the corpus

Understanding bilateral exchange rate volatility (2003, background): “Alternatively, Fernandez-Arias et al (2001) and Poirson (2001) do consider financial factors (specifically, the ability to issue international debt in domestic currency) but study multivariate exchange rate volatility and only for a limited number of countries.”
The Classification and Performance of Alternative Exchange-Rate Systems (2008, methodology): “(ii) A similar approach was used by Poirson (2001), who constructed a rigidity index on the basis of the ratio of exchange-volatility to reserves for a sample of 93 countries during 1990-98.”