DP5141 How to Exit from Fixed Exchange Rate Regimes
|Author(s):||Ahmet Atil Asici, Nadezhda Ivanova, Charles Wyplosz|
|Publication Date:||July 2005|
|Keyword(s):||exchange rate regimes, macroeconomic policy|
|JEL(s):||C14, C34, F30, F31, F41|
|Programme Areas:||International Macroeconomics|
|Link to this Page:||cepr.org/active/publications/discussion_papers/dp.php?dpno=5141|
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.