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Title: Fear of Floating and Pegging: A Simultaneous Choice Model of De Jure and De Facto Exchange Rate Regimes

Author(s): Jürgen von Hagen and Jizhong Zhou

Publication Date: October 2008

Keyword(s): de facto exchange rate regimes, developing countries and simultaneous equations

Programme Area(s): International Macroeconomics

Abstract: We present an analysis of the determinants of de jure and de facto exchange rate regimes based on a panel probit model with simultaneous equations. The model is estimated using simulation-based maximum likelihood methods. The empirical results suggest a triangular structure of the model such that the choice of de facto regimes depends on the choice of de jure regimes but not vice versa. This gives rise to a novel interpretation of regime discrepancies.

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Bibliographic Reference

von Hagen, J and Zhou, J. 2008. 'Fear of Floating and Pegging: A Simultaneous Choice Model of De Jure and De Facto Exchange Rate Regimes '. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=7006