scholarly journals The Mirage of Exchange Rate Regimes for Emerging Market Countries

2003 ◽  
Vol 17 (4) ◽  
pp. 99-118 ◽  
Author(s):  
Guillermo A Calvo ◽  
Frederic S Mishkin
Keyword(s):  
Exchange Rate ◽  
Exchange Rate Regime ◽  
Emerging Market ◽  
Exchange Rate Regimes ◽  
Institutional Arrangements ◽  
Standard Theory ◽  
General Question ◽  
Institutional Reforms ◽  
Emerging Market Countries ◽  
Floating Rates

This paper argues that much of the debate on choosing an exchange rate regime misses the boat. It begins by discussing the standard theory of choice between exchange rate regimes, and then explores the weaknesses in this theory, especially when it is applied to emerging market economies. It then discusses a range of institutional traits that might predispose a country to favor either fixed or floating rates, and then turns to the converse question of whether the choice of exchange rate regime may favor the development of certain desirable institutional traits. The conclusion from the analysis is that the choice of exchange rate regime is likely to be of second order importance to the development of good fiscal, financial, and monetary institutions in producing macroeconomic success in emerging market countries. This suggests that less attention should be focused on the general question whether a floating or a fixed exchange rate is preferable, and more on these deeper institutional arrangements. A focus on institutional reforms rather than on the exchange rate regime may encourage emerging market countries to be healthier and less prone to the crises that we have seen in recent years.

scholarly journals Choice Of Exchange Rate Regimes For Developing Countries: Better Be Fixed Or Floating?

2011 ◽  
Vol 6 (12) ◽  
Author(s):  
Elif O. Kan
Keyword(s):  
Exchange Rate ◽  
Open Economy ◽  
Emerging Economies ◽  
Financial Integration ◽  
Exchange Rate Regime ◽  
Emerging Market ◽  
Institutional Reforms ◽  
Policy Regimes ◽  
Emerging Market Countries ◽  
Currency Mismatches

The following paper is a summary article about the choice of exchange rate regime for a developing country considering the importance of currency mismatches, debt intolerance, and fear of floating, financial globalization, institutions and sudden stops. In this paper, I first summarize recent researches and papers on this specific issue. In a recent work of theirs, Calvo and Mishkin(2003) argue that much of the debate on choosing an exchange rate regime misses the boat and concludes that choice of exchange rate regime is likely to be of second order importance to the development of good fiscal, financial, and monetary institutions in producing macroeconomic success in emerging market countries and that a focus on institutional reforms rather than on the exchange rate regime may encourage emerging market countries to be healthier and less prone to the crises that we have seen in recent years. Another major study in this subject belong to Obtsfeld(2004) which claim that the measurable gains from financial integration appear to be lower for emerging markets than for higher-income countries, and appear to have been limited by recent crises. Obtsfeld identifies one factor limiting the gains from financial integration as the difficulty emerging economies face in resolving the open-economy trilemma which claim that many emerging economies cannot live comfortably either with fixed or with freely floating exchange rates. And finally, Stanley Fisher (2001) discusses the bipolar or two-corner solution view of intermediate policy regimes between hard pegs and floating are not sustainable and that use of pegged rates for countries open to international capital flows. Finally, I sum up with some concluding remarks.

scholarly journals Global Financial Cycles and the Exchange Rate Regime: A Perspective from Emerging Markets

2018 ◽  
Vol 108 ◽  
pp. 499-504 ◽  
Author(s):  
Maurice Obstfeld ◽  
Jonathan D. Ostry ◽  
Mahvash S. Qureshi
Keyword(s):  
Exchange Rate ◽  
Emerging Markets ◽  
Exchange Rate Regime ◽  
Emerging Market ◽  
Exchange Rate Regimes ◽  
Exchange Rate Flexibility ◽  
Macroeconomic Conditions ◽  
Financial Conditions ◽  
Advanced Economies ◽  
Financial Cycles

This paper examines the claim that exchange rate regimes are of little relevance in the transmission of global financial conditions to domestic financial and macroeconomic conditions. Our findings suggest that exchange rate regimes do matter, at least for emerging market economies. The transmission of global financial shocks to domestic variables is magnified under fixed exchange rate regimes relative to more flexible regimes. For advanced economies, however, the jury is still out, as the recent paucity of truly fixed regimes among these economies poses a challenge for estimating the effect of exchange rate flexibility.

scholarly journals Pengujian Trilemma Conditions pada Perekonomian Indonesia

2017 ◽  
Vol 17 (2) ◽  
pp. 151-168
Author(s):  
Mela Yunita ◽  
Noer Azam Achsani ◽  
Lukytawati Anggraeni
Keyword(s):  
Monetary Policy ◽  
Exchange Rate ◽  
Inflation Targeting ◽  
Financial Integration ◽  
Exchange Rate Regime ◽  
Emerging Market ◽  
Emerging Market Countries ◽  
Constant Regression ◽  
Policy Objectives ◽  
Over Time

Testing the Trilemma Conditions of Indonesian EconomyThe key challenge for monetary policy in emerging market countries is simultaneously maintain monetary independence, exchange rate stability, and join with financial integration. This reseach explain the interaction of monetary policy in Indonesia over time to answer those three challenge with a Trilemma conditions. This research evaluate the Bank Indonesia’s decision to change the exchange rate regime and apllied ”inflation targeting”. The methods include to build the Trilemma’ index and testing the Trilemma with constant regression. The results indicate that Bank Indonesia has tradeoff in determining the combination of monetary policy objectives. Tradeoff for Bank Indonesia more heavy under free floating due to fear of floating’s problem and tradeoff lighter when inflation targeting applied.Keywords: Trilemma Hyphotesis; Different Exchange Rate Rezim; Inflation Targeting AbstrakTantangan utama kebijakan moneter di negara berkembang adalah secara bersamaan dapat mempertahankan independensi moneter, menjaga stabilitas nilai tukar, dan terlibat dalam integrasi keuangan global. Penelitian ini menjelaskan bagaimana kombinasi kebijakan moneter di Indonesia dari waktu ke waktu dapat menjawab ketiga tantangan tersebut dengan memenuhi kondisi Trilemma. Penelitian ini mengevaluasi keputusan Bank Indonesia mengubah rezim nilai tukar dan keputusan menerapkan target inflasi. Metode yang digunakan yaitu membangun indeks Trilemma dan mengujinya menggunakan constant regression. Hasilnya menunjukkan bahwa Bank Indonesia menghadapi tradeoff dalam menentukan kombinasi tujuan kebijakannya. Tradeoff lebih berat ketika periode rezim free floating karena adanya masalah fear of floating, sedangkan tradeoff lebih ringan ketika penerapan inflation targeting.

scholarly journals The Main Determinants of Capital Inflows in Emerging Market Economies: Does the Exchange Rate Regime Matter?

2020 ◽  
Vol 6 (2) ◽  
pp. 163-167
Author(s):  
Fatma Taşdemir
Keyword(s):  
Exchange Rate ◽  
Exchange Rate Regime ◽  
Emerging Market ◽  
Capital Inflows ◽  
Emerging Market Economies ◽  
Foreign Direct Investments ◽  
Market Economies ◽  
Real Gdp ◽  
Long Run ◽  
Main Determinants

There is a bulk of literature in analyzing the impacts of exchange rate regimes (ERRs) on capital flows into emerging market economies. However, these studies mainly do not take into account integration and cointegration properties of variables. This paper aims to tackle this important issue by investigating whether ERRs matter for the impacts of the main push (global financial conditions, GFC) and pull (real GDP) factors on capital inflows into emerging market economies. We find that worsening GFC decreases all types of capital inflow except foreign direct investments in case of floating ERR. This impact is statistically significant only for portfolio inflows in case of managed ERR. The pull factor is often positive and statistically significant in determining capital inflows in the long-run only under floating ERRs. These results suggest that the long-run impacts of the main pull and push factors on capital inflows are often magnified under more flexible ERRs.

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