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

See all articles by Eduardo Levy Levy-Yeyati

Eduardo Levy Levy-Yeyati

Universidad Torcuato Di Tella - School of Business

Federico Sturzenegger

Universidad Torcuato Di Tella; Harvard University - Harvard Kennedy School (HKS); National Bureau of Economic Research (NBER)

Date Written: January 2001

Abstract

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

Levy-Yeyati, Eduardo Levy and Sturzenegger, Federico, To Float or to Trail: Evidence on the Impact of Exchange Rate Regimes (January 2001). UTDT, CIF Working Paper No. 1/01, Available at SSRN: https://ssrn.com/abstract=263824 or http://dx.doi.org/10.2139/ssrn.263824

Eduardo Levy Levy-Yeyati (Contact Author)

Universidad Torcuato Di Tella - School of Business ( email )

Saenz Valiente 1010
C1428BIJ Buenos Aires
Argentina

Federico Sturzenegger

Universidad Torcuato Di Tella ( email )

Minones 2159
1428 Buenos Aires, 1428
Argentina

Harvard University - Harvard Kennedy School (HKS) ( email )

79 John F. Kennedy Street
Cambridge, MA 02138
United States
617-496-3255 (Phone)
617-496-1722 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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