The Discipline Effects of Fixed Exchange Rates: Constraint versus Incentive Effects and the Distinction between Hard and Soft Pegs
In: Global economic review, Band 41, Heft 1, S. 1-31
ISSN: 1744-3873
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In: Global economic review, Band 41, Heft 1, S. 1-31
ISSN: 1744-3873
In: Journal of financial economic policy, Band 3, Heft 4, S. 288-303
ISSN: 1757-6393
PurposeThere has been significant interest in the classification of exchange rate regimes in order to investigate a wide range of hypotheses. Studies of the effects of exchange rate regimes on crises and other aspects of economic performance can have important implications for policy choices. The paper provides a guide to the major new large data sets that classify exchange rate regimes and to critically analyze important methodological issues.Design/methodology/approachThe study surveys and critiques the literature and provides theoretical analysis of major issues involved in classifying exchange rate regimes.FindingsThe study finds that all of the new data sets have problems but some have more problems than others and several of them are substantial improvements on what was previously available. It is also shown that the best ways to classify depend on the issue being addressed and that for detailed studies variants of measures using the concept of exchange market pressure are the most promising. Directions for future research are also discussed.Originality/valueThe paper makes researchers aware of the new data sets that are available and discusses their strengths and weaknesses. It also presents original analysis of several of the major conceptual issues involved in classifying exchange rate regimes.