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The mirage of floating exchange rates

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  • Reinhart, Carmen

Abstract

This note summarizes some of the highlights of my longer paper with Guillermo Calvo”Fear of Floating.” Many emerging market countries have suffered financial crises. One view blames soft pegs for these crises. Adherents to that view suggest that countries move to corner solutions--hard pegs or floating exchange rates. We analyze the behavior of exchange rates, reserves, and interest rates to assess whether there is evidence that country practice is moving toward corner solutions. We focus on whether countries that claim they are floating are indeed doing so. We find that countries that say they allow their exchange rate to float mostly do not--there seems to be an epidemic case of “fear of floating.”

Suggested Citation

  • Reinhart, Carmen, 2000. "The mirage of floating exchange rates," MPRA Paper 13736, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:13736
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    References listed on IDEAS

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    1. Mr. Jonathan David Ostry & Ms. Anne Marie Gulde & Mr. Atish R. Ghosh & Holger C. Wolf, 1995. "Does the Nominal Exchange Rate Regime Matter?," IMF Working Papers 1995/121, International Monetary Fund.
    2. 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.
    3. Morris Goldstein (ed.), 1999. "Safeguarding Prosperity in a Global Financial System: The Future International Financial Architecture," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 50, April.
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    More about this item

    Keywords

    fear of floating fixed exchange rates interest rates reserves;

    JEL classification:

    • G1 - Financial Economics - - General Financial Markets
    • F31 - International Economics - - International Finance - - - Foreign Exchange

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