External Shocks and Banking Crises in Developing Countries: Does the Exchange Rate Regime Matter?

ABSTRACT The choice of exchange rate regime is the most relevant decision in the economic world that has to be faced by the economic authority until now. Exchange rate regime that is applied by one country become a controversial debate after the Asia’s crisis in the year 1997-1998, especially for developing countries and emerging economies in Asia. The purpose of this research is to see the impact of export diversification, intensive margin and extensive margin to the choice of the exchange rate regime in nine emerging and developing countries in Asia 1991-2014.This research uses the panel logistic regression model to analyze the two model that are used in the research; they are: model 1 (the impact of export diversification to the exchange rate regime),and model 2 (the impact of extensive margin and intensive margin to the exchange rate regime. To avoid and to lessen the chances of endogeneity problem therefore, all of the independent variables and the control variable must be lagged in one period.The results of the regression shows that export diversification have a significant positive impact on the exchange rate regime. When export diversification is decomposed into intensive margin and extensive margins, the result shows that the extensive margins also have a significant positive impact towards the exchange rate regime, while the intensive margin does not show any significant impact towards the exchange rate regime choice. Keywords: exchange rate regime, export diversification, intensive margin, extensive margin, emerging and developing countries in Asia.

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Exchange rate determination and the flaws of mainstream monetary theory

Brazilian Journal of Political Economy ◽

10.1590/0101-31572018v38n01a06 ◽

2018 ◽

Vol 38 (1) ◽

pp. 99-114

Author(s):

HEINER FLASSBECK

Keyword(s):

Developing Countries ◽

Exchange Rate ◽

Financial Markets ◽

Exchange Rates ◽

Monetary Theory ◽

International Financial Markets ◽

External Shocks ◽

Exchange Rate Determination ◽

Equilibrium Level ◽

The Exchange Rate

ABSTRACT Developing countries in general need flexibility and a sufficient number of instruments to prevent excessive volatility. Evidence does not support the orthodox belief that, with free floating, international financial markets will perform that role by smoothly adjusting exchange rates to their “equilibrium” level. In reality, exchange rates under a floating regime have proved to be highly unstable, leading to long spells of misalignment. The experience with hard pegs has not been satisfactory either: the exchange rate could not be corrected in cases of external shocks or misalignment. Given this experience, “intermediate” regimes are preferable when there is instability in international financial markets.

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Arguments for the Ruble Exchange Rate Management

Voprosy Ekonomiki ◽

10.32609/0042-8736-2015-12-51-68 ◽

2015 ◽

pp. 51-68 ◽

Cited By ~ 1

Author(s):

S. Andryushin

Keyword(s):

Monetary Policy ◽

Exchange Rate ◽

Inflation Targeting ◽

Exchange Rate Regime ◽

Exchange Rate Volatility ◽

External Shocks ◽

Exchange Rate Management ◽

Floating Exchange Rate ◽

The Exchange Rate ◽

Automatic Mechanism

The paper discusses the target guides and the Bank of Russia’s monetary policy operational instruments. Events of 2014-2015 showed that the inflation targeting regime is not an effective target guide of the Bank of Russia’s monetary policy. The key interest rate fails to reflect the proper price of holding and using of financial resources of households, financial and non-financial organizations. The floating exchange rate regime has not become an automatic mechanism of external shocks absorption, but intensifies the exchange rate volatility instead. The exchange rate management is the only effective regime for the current Bank of Russia’s monetary policy.

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The influence of inflation targeting on the pass-through effect of the exchange rate

Voprosy Ekonomiki ◽

10.32609/0042-8736-2018-11-70-84 ◽

2018 ◽

pp. 70-84

Author(s):

Ph. S. Kartaev ◽

Yu. I. Yakimova

Keyword(s):

Developing Countries ◽

Monetary Policy ◽

Exchange Rate ◽

Inflation Targeting ◽

Policy Regime ◽

Short And Long Term ◽

The Exchange Rate ◽

Pass Through ◽

The Impact

The paper studies the impact of the transition to the inflation targeting regime on the magnitude of the pass-through effect of the exchange rate to prices. We analyze cross-country panel data on developed and developing countries. It is shown that the transition to this regime of monetary policy contributes to a significant reduction in both the short- and long-term pass-through effects. This decline is stronger in developing countries. We identify the main channels that ensure the influence of the monetary policy regime on the pass-through effect, and examine their performance. In addition, we analyze the data of time series for Russia. It was concluded that even there the transition to inflation targeting led to a decrease in the dependence of the level of inflation on fluctuations in the ruble exchange rate.

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Exchange Rate Volatility in Emerging Markets:The Chilean Case

Revista Latinoamericana de Desarrollo Económico ◽

10.35319/lajed.20078191 ◽

2007 ◽

pp. 87-100

Author(s):

Juan R. Castro

Keyword(s):

Exchange Rate ◽

Exchange Rate Regime ◽

External Debt ◽

Exchange Rate Volatility ◽

Arch Model ◽

Macroeconomic Shocks ◽

Domestic Debt ◽

Domestic Credit ◽

The Face ◽

The Exchange Rate

The document conducts an empirical investigation on the volatility of the Chilean exchange rate regime, using a model of Objective Zones. Through the use of the ARCH model, the document tests the volatility of the exchange rate in the presence of different levels of international reserves and other macroeconomic shocks. The results show that domestic credit, domestic debt and external debt have the greatest impact on the volatility of the variables studied, especially when compared with other fundamental variables. The variance of the exchange rate is heterosedastic but it is not persistent, which implies that the exchange rate is stable, probably when it oscillates between two bands. The volatility of the exchange rate fluctuates to a greater extent in the face of changes in internal and external debt, than with the other variables used.

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