How to Exit from Fixed Exchange Rate Regimes

39 Pages Posted: 17 Aug 2005

See all articles by Ahmet Atil Asici

Ahmet Atil Asici

University of Geneva - Graduate Institute of International Studies (HEI)

Nadezhda Ivanova

Bank of Russia

Charles Wyplosz

University of Geneva - Graduate Institute of International Studies (HEI); Centre for Economic Policy Research (CEPR)

Date Written: July 2005

Abstract

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.

Keywords: Exchange rate regimes, macroeconomic policy

JEL Classification: C14, C34, F30, F31, F41

Suggested Citation

Asici, Ahmet Atil and Ivanova, Nadezhda and Wyplosz, Charles, How to Exit from Fixed Exchange Rate Regimes (July 2005). CEPR Discussion Paper No. 5141, Available at SSRN: https://ssrn.com/abstract=785147

Ahmet Atil Asici

University of Geneva - Graduate Institute of International Studies (HEI) ( email )

PO Box 136
Geneva, CH-1211
Switzerland

Nadezhda Ivanova

Bank of Russia ( email )

12 Neglinnaya Street
Moscow, 107016
Russia

Charles Wyplosz (Contact Author)

University of Geneva - Graduate Institute of International Studies (HEI) ( email )

PO Box 136
Geneva, CH-1211
Switzerland
+41 22 908 5946 (Phone)
+41 22 733 3049 (Fax)

HOME PAGE: http://heiwww.unige.ch/~wyplosz

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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