Does the Nominal Exchange Rate Regime Matter?

42 Pages Posted: 15 Feb 2006

See all articles by Atish R. Ghosh

Atish R. Ghosh

International Monetary Fund (IMF) - Policy Development and Review Department

Anne-Marie Gulde

International Monetary Fund (IMF)

Jonathan D. Ostry

Georgetown University; International Monetary Fund (IMF)

Multiple version iconThere are 2 versions of this paper

Date Written: November, 1995

Abstract

The effect of the exchange rate regime on inflation and growth is examined. The 30-year data set includes over 100 countries and nine regime types. Pegged regimes are associated with lower inflation than intermediate or flexible regimes. This anti-inflationary benefit reflects lower money supply growth (a discipline effect) and higher money demand growth (a credibility effect). Output growth does not vary significantly across regimes: Countries with pegged regimes invest more and are more open to international trade than those with flexible rates, but they experience lower residual productivity growth. Output and employment are more variable under pegged rates than under flexible rates.

JEL Classification: F33, F43, E31

Suggested Citation

Ghosh, Atish R. and Gulde, Anne-Marie and Ostry, Jonathan D., Does the Nominal Exchange Rate Regime Matter? (November, 1995). IMF Working Paper No. 95/121, Available at SSRN: https://ssrn.com/abstract=883267

Atish R. Ghosh (Contact Author)

International Monetary Fund (IMF) - Policy Development and Review Department ( email )

700 19th St. NW
Washington, DC 20431
United States

Anne-Marie Gulde

International Monetary Fund (IMF) ( email )

700 19th Street NW
Washington, DC 20431
United States

Jonathan D. Ostry

Georgetown University ( email )

Washington, DC 20057
United States

International Monetary Fund (IMF) ( email )

700 19th Street NW
Washington, DC 20431
United States

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