The Choice of Exchange Rate Regimes: An Empirical Analysis for Transition Economies

Juergen von Hagen and Jizhong Zhou

No 3289, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We analyse the choice of exchange rate regimes of the 25 transition economies in Europe and the CIS after 1990. The empirical results show that the traditional Optimum Currency Area considerations provide relevant guidance for the exchange rate regime choices in these countries. Moreover, inflation rates, cumulative inflation differentials and the availability of international reserves influence regime choices. That is, macroeconomic stabilization and the ability to commit to a credible exchange rate peg play important roles in the determination of exchange rate regime choices. Large government deficits have ambiguous effects; they increase the likelihood of moving from a flexible exchange rate to an intermediate peg as well as the likelihood of moving from a fixed to an intermediate peg.

Keywords: Exchange rate regimes; Transition economies (search for similar items in EconPapers)
JEL-codes: E52 F31 F33 F41 (search for similar items in EconPapers)
Date: 2002-03
New Economics Papers: this item is included in nep-ifn
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Citations: View citations in EconPapers (18)

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Related works:
Journal Article: The choice of exchange rate regime: An empirical analysis for transition economies (2005)
Working Paper: The choice of exchange rate regimes: An empirical analysis for transition economies (2002)
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