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South Asian Exchange Rates Regimes: Fixed, Flexible or Something In-between?

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  • Tony Cavoli
  • Ramkishen S. Rajan

Abstract

This article presents an analysis of the degree of de facto exchange rate flexibility in the exchange rate regimes for selected South Asian economies, viz., Bangladesh, India, Pakistan and Sri Lanka. Three commonly employed measures of exchange rate classification are used: a simple exchange market pressure (EMP) measure, a GARCH specification and a regression-based model. The article finds strong evidence of limited flexibility in all the South Asian economies—particularly against the US dollar, which can suggest a heavy degree of currency management. While Bangladesh, Pakistan and Sri Lanka effectively have fixed exchange rate regimes vis-à -vis the US dollar, India appears to operate somewhat more as a managed floater with a movement towards greater flexibility in recent years.

Suggested Citation

  • Tony Cavoli & Ramkishen S. Rajan, 2013. "South Asian Exchange Rates Regimes: Fixed, Flexible or Something In-between?," South Asia Economic Journal, Institute of Policy Studies of Sri Lanka, vol. 14(1), pages 1-15, March.
    • Handle: RePEc:sae:soueco:v:14:y:2013:i:1:p:1-15
    DOI: 10.1177/1391561413477929
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    References listed on IDEAS

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    Cited by:

    1. Muhammad Arshad Khan & Ather Maqsood Ahmed, 2016. "Conducting Monetary Policy in South Asian Economies: An Investigation," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 55(3), pages 161-190.
    2. Mr. Manuk Ghazanchyan & Ms. Janet Gale Stotsky & Qianqian Zhang, 2015. "A New Look at the Determinants of Growth in Asian Countries," IMF Working Papers 2015/195, International Monetary Fund.

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    More about this item

    Keywords

    Exchange rate regimes; fixed; flexible; South Asia; US dollar peg;
    All these keywords.

    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions

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