Classifying Exchange Rate Regimes: Deeds vs. Words

35 Pages Posted: 19 May 2000

See all articles by Eduardo Levy Levy-Yeyati

Eduardo Levy Levy-Yeyati

Universidad Torcuato Di Tella - School of Business

Federico Sturzenegger

Universidad Torcuato Di Tella; Harvard University - Harvard Kennedy School (HKS); National Bureau of Economic Research (NBER)

Abstract

Most of the empirical literature on the relative merits of alternative exchange rate regimes uses the IMF 'de jure' classification based on the regime that governments claim to have, abstracting from the fact that many countries that in theory follow flexible regimes intervene in the exchange market to an extent that in practice makes them indistinguishable from fixed rate regimes, and vice versa. To address this problem, in this paper we construct a 'de facto' classification of exchange rate regimes. Using cluster analysis techniques, we group different regimes according to their behavior along three classification dimensions: the nominal exchange rate, changes in the nominal exchange rate, and international reserves. We compare our results with the IMF classification, and discuss the main discrepancies. Among other things, our classification finds no support for the hypothesis that intermediate regimes has been disappearing in recent years, and highlights the fact that in practice flexible regimes are restricted to cases of relatively minor exchange rate volatility.

JEL Classification: F3

Suggested Citation

Levy-Yeyati, Eduardo Levy and Sturzenegger, Federico, Classifying Exchange Rate Regimes: Deeds vs. Words. European Economic Review, Forthcoming. Available at SSRN: https://ssrn.com/abstract=214428 or http://dx.doi.org/10.2139/ssrn.214428

Eduardo Levy Levy-Yeyati (Contact Author)

Universidad Torcuato Di Tella - School of Business ( email )

Saenz Valiente 1010
C1428BIJ Buenos Aires
Argentina

Federico Sturzenegger

Universidad Torcuato Di Tella ( email )

Minones 2159
1428 Buenos Aires, 1428
Argentina

Harvard University - Harvard Kennedy School (HKS) ( email )

79 John F. Kennedy Street
Cambridge, MA 02138
United States
617-496-3255 (Phone)
617-496-1722 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Register to save articles to
your library

Register

Paper statistics

Downloads
747
Abstract Views
3,389
rank
32,245
PlumX Metrics