IDEAS home Printed from https://ideas.repec.org/a/ege/journl/v9y2009i2p823-835.html
   My bibliography  Save this article

How do Macroeconomic and Political Variables Affect the Flexibility of Exchange Rate Regime?

Author

Listed:
  • Mehmet Guclu

    (Ege University, Faculty of Economics and Administrative Siences, Department of Economics)

Abstract

The choice of exchange rate regime has become one of the most important issues once more in many economies after the financial crises in recent years. In the wake of the financial crises, many countries, especially emerging market economies, opted for floating exchange rate regimes by forsaking the pegged regimes. Consequently, an old debate on the choice and determinants of exchange rate regimes has been triggered. Economists have started to debate what appropriate exchange rate regime for an economy is. When the tendency in recent years is taken into consideration, the choice of exchange rate regime of the countries, especially emerging economies, needs to be analyzed. To do this, in this paper, we attempt to uncover how emerging market economies choose their exchange rate regimes. In other words, we try to find the economic and political factors underlying the choice of exchange rate regimes. The study includes 25 emerging market economies over the period 1970-2006. We use random effect ordered probit model in order to find the long run economic and political determinants of exchange rate regimes for emerging economies. The determinants of both the de jure and de facto exchange regimes are empirically analyzed in the paper.

Suggested Citation

  • Mehmet Guclu, 2009. "How do Macroeconomic and Political Variables Affect the Flexibility of Exchange Rate Regime?," Ege Academic Review, Ege University Faculty of Economics and Administrative Sciences, vol. 9(2), pages 823-835.
  • Handle: RePEc:ege:journl:v:9:y:2009:i:2:p:823-835
    as

    Download full text from publisher

    File URL: http://www.onlinedergi.com/MakaleDosyalari/51/PDF2009_2_21.pdf
    Download Restriction: no

    File URL: http://www.onlinedergi.com/eab/arsiv/arsivDetay.aspx?yil=2009&peryot=2
    File Function: Website of the journal issue
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Guillermo A. Calvo & Carmen M. Reinhart, 2002. "Fear of Floating," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 117(2), pages 379-408.
    2. Levy Yeyati, Eduardo & Sturzenegger, Federico & Reggio, Iliana, 2010. "On the endogeneity of exchange rate regimes," European Economic Review, Elsevier, vol. 54(5), pages 659-677, July.
    3. Jürgen von Hagen & Jizhong Zhou, 2005. "The choice of exchange rate regime: An empirical analysis for transition economies," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 13(4), pages 679-703, October.
    4. Dreyer, Jacob S., 1978. "Determinants of exchange-rate regimes for currencies of developing countries: Some preliminary results," World Development, Elsevier, vol. 6(4), pages 437-445, April.
    5. von Hagen, Jurgen & Zhou, Jizhong, 2007. "The choice of exchange rate regimes in developing countries: A multinomial panel analysis," Journal of International Money and Finance, Elsevier, vol. 26(7), pages 1071-1094, November.
    6. Mr. Paolo Mauro & Miss Grace Juhn, 2002. "Long-Run Determinants of Exchange Rate Regimes: A Simple Sensitivity Analysis," IMF Working Papers 2002/104, International Monetary Fund.
    7. Collins, Susan M., 1996. "On becoming more flexible: Exchange rate regimes in Latin America and the Caribbean," Journal of Development Economics, Elsevier, vol. 51(1), pages 117-138, October.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Mohamed Sfia, 2011. "The choice of exchange rate regimes in the MENA countries: a probit analysis," International Economics and Economic Policy, Springer, vol. 8(3), pages 275-305, September.
    2. Levy Yeyati, Eduardo & Sturzenegger, Federico & Reggio, Iliana, 2010. "On the endogeneity of exchange rate regimes," European Economic Review, Elsevier, vol. 54(5), pages 659-677, July.
    3. Mehmet Güçlü, 2008. "The Determinants of Exchange Rate Regimes in Emerging Market Economies," Papers of the Annual IUE-SUNY Cortland Conference in Economics, in: Oguz Esen & Ayla Ogus (ed.), Proceedings of the Conference on Emerging Economic Issues in a Globalizing World, pages 177-191, Izmir University of Economics.
    4. Eman Elish, 2019. "The Determinants of Optimal Exchange Rate Regimes in High and Low Oil-Producing Countries," Journal of Business Cycle Research, Springer;Centre for International Research on Economic Tendency Surveys (CIRET), vol. 15(2), pages 97-120, December.
    5. Christoph Fischer, 2011. "Currency blocs in the 21st century," Globalization Institute Working Papers 87, Federal Reserve Bank of Dallas.
    6. von Hagen, Jürgen & Zhou, Jizhong, 2004. "The choice of exchange rate regimes in developing countries: A mulitnominal panal analysis," ZEI Working Papers B 32-2004, University of Bonn, ZEI - Center for European Integration Studies.
    7. Ito, Hiro & Kawai, Masahiro, 2014. "Determinants of the Trilemma Policy Combination," ADBI Working Papers 456, Asian Development Bank Institute.
    8. von Hagen, Jurgen & Zhou, Jizhong, 2004. "The Choice of Exchange Rate Regime in Developing Countries: A Multinational Panel Analysis," CEPR Discussion Papers 4227, C.E.P.R. Discussion Papers.
    9. Philipp Harms & Mathias Hoffmann, 2011. "Deciding to Peg the Exchange Rate in Developing Countries: The Role of Private-Sector Debt," Open Economies Review, Springer, vol. 22(5), pages 825-846, November.
    10. Meissner, Christopher M. & Oomes, Nienke, 2009. "Why do countries peg the way they peg? The determinants of anchor currency choice," Journal of International Money and Finance, Elsevier, vol. 28(3), pages 522-547, April.
    11. Kato, Isamu & Uctum, Merih, 2008. "Choice of exchange rate regime and currency zones," International Review of Economics & Finance, Elsevier, vol. 17(3), pages 436-456.
    12. Graham Bird & Alex Mandilaras & Helen Popper, 2012. "Explaining Shifts in Exchange Rate Regimes," School of Economics Discussion Papers 1312, School of Economics, University of Surrey.
    13. Mengdi Song, 2018. "Network Effects of Countries’ Exchange Rate Regime Choices: A Spatial Analysis," Open Economies Review, Springer, vol. 29(5), pages 1061-1093, November.
    14. Jürgen Hagen & Jizhong Zhou, 2009. "Fear of Floating and Pegging: A Simultaneous Choice Model of De Jure and De Facto Exchange Rate Regimes in Developing Countries," Open Economies Review, Springer, vol. 20(3), pages 293-315, July.
    15. Mr. Aasim M. Husain & Mr. Ashoka Mody & Nienke Oomes & Mr. Robin Brooks & Mr. Kenneth Rogoff, 2003. "Evolution and Performance of Exchange Rate Regimes," IMF Working Papers 2003/243, International Monetary Fund.
    16. Alexis Cruz-Rodriguez, 2013. "Choosing and Assessing Exchange Rate Regimes: a Survey of the Literature," Revista de Analisis Economico – Economic Analysis Review, Universidad Alberto Hurtado/School of Economics and Business, vol. 28(2), pages 37-61, October.
    17. von Hagen, Jurgen & Zhou, Jizhong, 2008. "Fear of Floating and Pegging: A Simultaneous Choice Model of De Jure and De Facto Exchange Rate Regimes," CEPR Discussion Papers 7006, C.E.P.R. Discussion Papers.
    18. von Hagen, Jurgen & Zhou, Jizhong, 2007. "The choice of exchange rate regimes in developing countries: A multinomial panel analysis," Journal of International Money and Finance, Elsevier, vol. 26(7), pages 1071-1094, November.
    19. Hossain, Monzur, 2009. "Institutional development and the choice of exchange rate regime: A cross-country analysis," Journal of the Japanese and International Economies, Elsevier, vol. 23(1), pages 56-70, March.
    20. Fischer, Christoph, 2016. "Determining global currency bloc equilibria: An empirical strategy based on estimates of anchor currency choice," Journal of International Money and Finance, Elsevier, vol. 64(C), pages 214-238.

    More about this item

    Keywords

    Exchange Rate Regime; Emerging Market;

    JEL classification:

    • O24 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Trade Policy; Factor Movement; Foreign Exchange Policy
    • D51 - Microeconomics - - General Equilibrium and Disequilibrium - - - Exchange and Production Economies

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ege:journl:v:9:y:2009:i:2:p:823-835. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Baris Gök (email available below). General contact details of provider: https://edirc.repec.org/data/iiegetr.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.