Choosing (and Reneging on) Exchange Rate Regimes
31 Pages Posted: 29 Jun 2003 Last revised: 22 Oct 2021
Date Written: June 2003
We use data on announced and actual exchange rate arrangements to ask which countries follow de facto regimes different from their de iure ones, that is, do not do what they say. Our results suggest that countries with poor institutional quality have difficulty in maintaining pegging and abandon it more often. In contrast, countries with relatively good institutions display fear of floating, i.e. they manage more than announced, perhaps to signal their differences from those countries incapable of maintaining promises of monetary stability.
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