THE CLASSIFICATION AND PERFORMANCE OF ALTERNATIVE EXCHANGE-RATE SYSTEMS
Bank of Greece
University of Bern
University of Rochester
Owing to dissatisfaction with the IMF’s de jure classification of exchange-rate regimes, a substantial literature has emerged presenting de facto classifications of exchange-rate systems and using the latter classifications to compare performances of alternative regimes in terms of key macroeconomic variables. This paper critically reviews the literature on de facto regimes. In particular the paper (1) describes the main methodologies that have been used to construct de facto codings, (2) surveys the empirical literature generated by de facto regime codings, and (3) lays-out the problems inherent in constructing de facto classifications. The empirical literature is found to yield few robust findings. We argue that the as-yet unfulfilled objective of this literature, and the major research agenda for the future in this area, lies in the need of a more thorough investigation of the degree of monetary-policy independence without relying exclusively on movements in exchange rates, an agenda the attainment of which is made especially challenging because of the lack of comprehensive and reliable data on reserves and interest rates.
Keywords: Exchange-rate regimes; Economic growth; Inflation; Bipolar hypothesis
JEL classification: F3
Acknowledgements: We thank Heather Gibson, George Hondroyiannis, Inci Otker-Robe, Pavlos Petroulas, Michael Ulan, and Hari Vittas for helpful comments. We are also grateful to Juergen von Hagen for many penetrating comments and suggestions. We wish to thank the following individuals for supplying us with their data samples: Herald Anderson, Jeannine Bailliu, Barry Eichengreen, Rex Ghosh, David Leblang, and Nelson Mark. We have benefited from research assistance from Konstantina Manou. The views expressed are the authors’ own and should not be interpreted as those of their respective institutions.
Economic Research Department,
Bank of Greece, 21, E. Venizelos Ave., 102 50 Athens, Greece
Tel. +30210-320 2370
Fax +30210-320 2432