Exchange Rate Regimes and Economic Performance

UTDT, CIF Working Paper No. 2/01

43 Pages Posted: 3 Jun 2001

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)

Multiple version iconThere are 2 versions of this paper

Date Written: February 2001

Abstract

This paper studies the impact of exchange rate regimes on inflation, nominal money growth, real interest rates, and growth performance. We find that, for non-industrial economies, "long" pegs (defined as those lasting for five or more consecutive years) are associated with lower inflation than floats, but at the cost of an inferior growth performance. A similar tradeoff between inflation and growth is still present in the case of "hard" pegs (economies with currency boards or without separate legal tender), whose growth performance, as opposed to what is often suggested, does not differ significantly from that of conventional pegs. In contrast, "short" pegs clearly underperform floats, as they grow slower without providing any gains in terms of inflation.

Keywords: exchange rate regimes, growth, inflation, interest rates, hard pegs

JEL Classification: F31, F41, O47

Suggested Citation

Levy-Yeyati, Eduardo Levy and Sturzenegger, Federico, Exchange Rate Regimes and Economic Performance (February 2001). UTDT, CIF Working Paper No. 2/01, Available at SSRN: https://ssrn.com/abstract=263826 or http://dx.doi.org/10.2139/ssrn.263826

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

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