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Title: How to Exit from Fixed Exchange Rate Regimes

Author(s): Ahmet Atil Asici, Nadezhda Ivanova and Charles Wyplosz

Publication Date: July 2005

Keyword(s): exchange rate regimes and macroeconomic policy

Programme Area(s): International Macroeconomics

Abstract: This paper improves upon the recently developed literature on exits from fixed exchange rate regimes in three ways: 1) It allows for two indicators for post-exit macroeconomic conditions, the change in the exchange rate and the change in the output gap; 2) it tests whether the distinction between orderly and disorderly exit is statistically justified, and concludes that it is not; 3) it deals with the sample selection problem. The results, subject to extensive sensitivity analysis, suggest that post-exits are better when de-pegging occur in good macroeconomic conditions ? an unnatural move for most policy-makers ? when world interest rates decline and in the presence of capital controls. Importantly, ?good? macroeconomic policies do not seem to help with post-exit performance.

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Bibliographic Reference

Asici, A, Ivanova, N and Wyplosz, C. 2005. 'How to Exit from Fixed Exchange Rate Regimes'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=5141