Discussion paper

DP5141 How to Exit from Fixed Exchange Rate Regimes

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.


Wyplosz, C, N Ivanova and A Asici (2005), ‘DP5141 How to Exit from Fixed Exchange Rate Regimes‘, CEPR Discussion Paper No. 5141. CEPR Press, Paris & London. https://cepr.org/publications/dp5141