Structural Factors Affecting Exchange Rate Volatility: A Cross-Section Study

14 Pages Posted: 15 Feb 2006

See all articles by Jorge Iván Canales-Kriljenko

Jorge Iván Canales-Kriljenko

International Monetary Fund (IMF)

Karl Habermeier

International Monetary Fund (IMF)

Date Written: August 2004

Abstract

The paper examines factors affecting exchange rate volatility, with an emphasis on structural features of the foreign exchange regime. It draws for the first time on detailed survey data collected by the IMF on foreign exchange market organization and regulations. Key findings are that decentralized dealer markets, regulations on the use of domestic currency by nonresidents, acceptance of Article VIII obligations, and limits on banks` foreign exchange positions are associated with lower exchange rate volatility. The paper also provides support for earlier results on the influence of macroeconomic conditions and the choice of exchange rate regime on volatility.

Keywords: Exchange rate, volatility, foreign exchange regulations

JEL Classification: F3, F31, F4

Suggested Citation

Canales-Kriljenko, Jorge Iván and Habermeier, Karl, Structural Factors Affecting Exchange Rate Volatility: A Cross-Section Study (August 2004). IMF Working Paper No. 04/147, Available at SSRN: https://ssrn.com/abstract=878972

Jorge Iván Canales-Kriljenko (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street N.W.
Washington, DC 20431
United States

Karl Habermeier

International Monetary Fund (IMF) ( email )

700 19th Street NW
Washington, DC 20431
United States

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