To Float or to Trail: Evidence on the Impact of Exchange Rate Regimes
UTDT, CIF Working Paper No. 1/01
29 Pages Posted: 7 May 2001
Date Written: January 2001
We study the relationship between exchange rate regimes and economic growth for a sample of 154 countries over the post-Bretton Woods period (1974-1999), using a new de facto classification of regimes based on the actual behavior of the relevant macroeconomic variables. In contrast with previous studies, we find that, for developing countries, less flexible exchange rate regimes are strongly associated with slower growth, as well as with greater output volatility. For industrial countries, on the contrary, regimes do not appear to have any significant impact on growth. The results are robust to endogeneity corrections and a number of alternative specifications borrowed from the growth literature.
Keywords: Exchange rate regimes, growth
JEL Classification: F31, F41, O47
Suggested Citation: Suggested Citation