Description: Does the Exchange Rate Regime Affect Macroeconomic Performance : Evidence from Transition Economics

Cover Image

QR Code

Does the Exchange Rate Regime Affect Macroeconomic Performance : Evidence from Transition Economics

To examine whether a country's exchange rate regime has any impact on inflation and growth performance in transition economies, the authors develop an empirical framework that addresses some of the main problems plaguing empirical work in this...

Full description

Bibliographic Details
Main Authors:	Domac, Ilker, Peters, Kyle, Yuzefovich, Yevgeny
Language:	English en_US
Published:	World Bank, Washington, DC 2014
Subjects:	ADVERSE EFFECTS AGGREGATE DEMAND BALANCE OF PAYMENTS BALANCE OF PAYMENTS STATISTICS BANKING CRISES BASKET OF CURRENCIES BUDGET DEFICIT BUDGET DEFICITS CAPITAL ACCOUNT CAPITAL FLOWS CAPITAL INFLOWS CAPITAL MARKETS CAPITAL MOBILITY CENTRAL BANK CENTRAL PLANNING COUNTRIES COUNTRY SPECIFIC CRISIS EPISODES CURRENCY CURRENCY BOARD CURRENCY BOARDS CURRENCY PEGS CURRENT ACCOUNT CURRENT ACCOUNT DEFICIT DEREGULATION DEVELOPED COUNTRIES DEVELOPING COUNTRIES DEVELOPING WORLD DOMESTIC ECONOMY ECONOMIC ACTIVITY ECONOMIC LITERATURE ECONOMIC OBJECTIVES ECONOMIC STUDIES ECONOMICS EMERGING ECONOMIES EMERGING MARKETS EMPIRICAL EVIDENCE EMPIRICAL LITERATURE EMPIRICAL RESULTS EMPIRICAL STUDIES EMPIRICAL WORK ERROR TERM EURO EXCESS DEMAND EXCHANGE RATE EXCHANGE RATE ARRANGEMENTS EXCHANGE RATE CHANGES EXCHANGE RATE FLEXIBILITY EXCHANGE RATE POLICIES EXCHANGE RATE POLICY EXCHANGE RATE REGIME EXCHANGE RATE REGIMES EXCHANGE RATES EXPORTS FINANCIAL DEPTH FINANCIAL ENVIRONMENT FINANCIAL INSTITUTIONS FINANCIAL MARKETS FINANCIAL POLICIES FISCAL DEFICIT FIXED EXCHANGE RATE FIXED EXCHANGE RATES FLEXIBLE EXCHANGE RATES FLOATING EXCHANGE RATE FLOATING EXCHANGE RATES FLOATING RATES FOREIGN EXCHANGE FOREIGN EXCHANGE MARKET FOREIGN SHOCKS GDP GOVERNMENT EXPENDITURES GROWTH EQUATION GROWTH PERFORMANCE INCOME INDEXATION INFLATION INFLATION PERFORMANCE INFLATION RATE INFLATION RATES INTEREST RATES INTERMEDIATE REGIMES INTERNATIONAL MARKETS INTERNATIONAL TRADE INTERNATIONAL TRANSACTIONS MACROECONOMIC CONDITIONS MACROECONOMIC IMPLICATIONS MACROECONOMIC OUTCOMES MACROECONOMIC PERFORMANCE MACROECONOMIC POLICIES MACROECONOMIC STABILIZATION MACROECONOMIC VARIABLES MONETARY POLICY MONEY CREATION MONEY DEMAND MONEY SUPPLY NOMINAL ANCHOR NOMINAL EXCHANGE RATE NOMINAL EXCHANGE RATES OPEN ECONOMIES OUTPUT GROWTH OUTPUT VOLATILITY POLICY MAKERS POLICY RESEARCH POLICY VARIABLES POVERTY REDUCTION PRICE CONTROLS PRIVATE SECTOR REAL EXCHANGE REAL EXCHANGE RATE REAL EXCHANGE RATE VOLATILITY REAL OUTPUT REAL TERMS RESERVES SDR PEGS SEIGNIORAGE SIGNIFICANT IMPACT SOFT PEGS STABILIZATION PROGRAMS TELECOMMUNICATIONS TERMS OF TRADE TRANSITION TRANSITION COUNTRIES TRANSITION ECONOMIES TRANSITION PROCESS VULNERABILITY
Online Access:	http://documents.worldbank.org/curated/en/2001/07/1552022/exchange-rate-regime-affect-macroeconomic-performance-evidence-transition-economics http://hdl.handle.net/10986/19572

Description
Summary:	To examine whether a country's exchange rate regime has any impact on inflation and growth performance in transition economies, the authors develop an empirical framework that addresses some of the main problems plaguing empirical work in this strand of the literature: the Lucas critique, the endogeneity of the exchange rate regime, and the sample selection problem. Empirical results demonstrate that the exchange rate regime does affect inflation performance. the results suggest that: 1) Transition countries with intermediate arrangements might reduce inflation if they were to adopt a fixed regime. 2) Switching from a floating regime to an intermediate regime might not reduce inflation. 3) An unanticipated float--when a country whose fundamentals make it unlikely to adopt another regime adopts a floating regime--results in lower inflation. Based on their results, it is not possible to infer more about one particular exchange rate regime being superior to another in terms of growth performance. But empirical findings do underscore the different effects that policy variables--and other variables influencing economic activity--have on growth under different exchange-rate arrangements.