scholarly journals EXTERNAL ADJUSTMENT AND FLEXIBILITY OF THE EXCHANGE RATE REGIME: THE CASE OF TRANSITION COUNTRIES

2021 ◽  
Vol 19 (34) ◽  
Author(s):  
Dragan Gligorić ◽  
Borce Trenovski ◽  
Kristijan Kozheski
Keyword(s):  
Exchange Rate ◽  
Exchange Rate Regime ◽  
Flexible Exchange Rate ◽  
Transition Countries ◽  
Eastern European ◽  
Goods And Services ◽  
External Adjustment ◽  
Independent States ◽  
Cis Countries ◽  
In Cis

Milton Friedman’s traditional claim is that flexible exchange rates facilitate external adjustment by means of their cor- rective movements before the balance of payments crisis occurs. In order to test this hypothesis, we employ the first order autoregression based on the panel data on exchange rate regime and external balance expressed as the share of balance of goods and services in GDP. The sample covers 16 Central and Eastern European (CEE) and 12 Common- wealth of Independent States (CIS) transition countries over the period 2000-2019. The results, which are based on the sample of all transition countries, failed to prove that more flexible exchange rate regimes facilitate external adjust- ment. When the analysis was performed on two groups of countries separately, the results showed that the deficit of balance of goods and services in CIS countries has a higher persistence compared to CEE countries. However, a more flexible exchange rate regime does not facilitate external ad- justment. On the other hand, in CEE countries, the relation- ship between exchange rate regime flexibility and the rate of balance of goods and services reversion exists, proving that Friedman’s hypothesis does hold.

scholarly journals Exchange rate regime choice

2006 ◽  
Vol 53 (3) ◽  
pp. 313-334 ◽  
Author(s):  
Emilija Beker
Keyword(s):  
Decision Making ◽  
Exchange Rate ◽  
Shelf Life ◽  
Exchange Rate Regime ◽  
Flexible Exchange Rate ◽  
Point Of View ◽  
External Factors ◽  
Advantages And Disadvantages ◽  
Complex Process ◽  
Highly Sensitive

The choice of an adequate exchange rate regime proves to be a highly sensitive field within which the economic authorities present and confirm themselves. The advantages and disadvantages of fixed and flexible exchange rate regimes, which have been quite relativized from the conventional point of view, together with simultaneous, but not synchronized effects of structural and external factors, remain permanently questioned throughout a complex process of exchange rate regime decision making. The paper reflects the attempt of critical identification of the key exchange rate performances with emphasis on continuous non-uniformity and (un)certainty of shelf life of a relevant choice.

scholarly journals EXCHANGE RATE FLEXIBILITY, CAPITAL MOBILITY AND INFLATION TRANSMISSION IN MALAYSIA

2009 ◽  
Vol 8 (1) ◽  
Author(s):  
Mansor H. Ibrahim
Keyword(s):  
Exchange Rate ◽  
Capital Mobility ◽  
Exchange Rate Regime ◽  
Flexible Exchange Rate ◽  
International Transmission ◽  
Exchange Rate Flexibility ◽  
The Us ◽  
Small Economy ◽  
Inflation Transmission ◽  
Limited Exchange

The paper assesses the international transmission of inflation for a small economy, Malaysia, over three sample periods marked by different degrees of exchange rate flexibility. Contradicting to conventional wisdom of less pronounced foreign nominal influences under the flexible exchange rate regime, this research finds evidence that the inflation transmission from the US to Malaysia is strongest during the period marked by increasing exchange rate flexibility (i.e. 1993-1998). This research also observes significant inflation effects of exchange rate depreciation during the same period. While this research observe less pronounced impacts of the US during the limited exchange rate flexibility period (i.e. 1988-1999), the US influences are virtually absent during the recent fixed regime (i.e. 1998-2005). This research believes that the intensity of capital flows across the three periods might have explained the results.

scholarly journals Still tied by golden fetters: the global response to the US recession of 1937–1938

2012 ◽  
Vol 19 (1) ◽  
pp. 21-48 ◽  
Author(s):  
Scott Urban ◽  
Tobias Straumann
Keyword(s):  
Exchange Rate ◽  
Gold Standard ◽  
Exchange Rate Regime ◽  
Central Banking ◽  
Eastern European ◽  
Standard View ◽  
Global Response ◽  
Policy Regime ◽  
The Us ◽  
Eastern European Countries

The US recession of 1937–8 is one of the deepest on record. Yet it did not produce a global depression – quite unlike 1930. According to the standard view, this reflected an unfettering of central banking after the collapse of the international gold standard circa 1931. We challenge this view. While Germany and a couple of Central and Eastern European countries were sheltered by binding exchange controls, most countries were still constrained by their golden fetters, as our new exchange rate regime classification suggests. The underlying policy regime was surprisingly similar to that of the 1929–30 downturn. What mattered was a quick reversal in US policy in 1938 and, for many countries, a more plentiful stock of international reserves.

Negotiating the Trilemma: The Indian Experience

2012 ◽  
Vol 12 (1) ◽  
pp. 1850249 ◽  
Author(s):  
Abhijit Sen Gupta ◽  
Ganesh Manjhi
Keyword(s):  
Exchange Rate ◽  
Capital Flows ◽  
Current Account Deficit ◽  
Exchange Rate Regime ◽  
Flexible Exchange Rate ◽  
Active Management ◽  
Reserve Bank ◽  
Indian Experience ◽  
Policy Objectives ◽  
Healthy Growth

Increased integration with the global capital markets in recent years has forced India to negotiate the trilemma, balancing the objectives of monetary independence, exchange rate stability, and orderly capital flows. India’s calibrated approach towards liberalization of capital account, wherein certain flows and agents were accorded priority in the liberalization process, has helped India to deal with the trilemma. In this paper, we examine India’s experience in negotiating the trilemma during the last three decades. In doing so, we deviate from the existing literature by quantifying the various policy objectives under the trilemma. This allows us to analyze the extent to which pursuit of an objective has entailed giving up two other objectives. Using empirical methods, we find that India has been constrained by the trilemma during the last three decades. However, instead of adopting corner solutions, India has juggled the various policy objectives under the trilemma as per the demands of the macroeconomic situation. The overall policy architecture encompassed active management of capital flows, especially volatile flows and debt flows, a moderately flexible exchange rate regime with the Reserve Bank of India (RBI) intervening at times to prevent excessive volatility, sterilization of these interventions through multiple instruments, and building up of a stockpile of reserves. This intermediate approach has suited India well as it has been able to maintain a healthy growth rate, targeted monetary and credit growth rates, a moderate inflation rate through most of the period, and a sustainable current account deficit.

Inflation targeting and exchange rate regimes in emerging markets

2018 ◽  
Vol 18 (2) ◽  
Author(s):  
Christian Ebeke ◽  
Armand Fouejieu
Keyword(s):  
Exchange Rate ◽  
Emerging Markets ◽  
Inflation Targeting ◽  
Propensity Scores ◽  
Exchange Rate Regime ◽  
Flexible Exchange Rate ◽  
Marginal Effect ◽  
It Adoption ◽  
Exchange Rate Flexibility ◽  
The Exchange Rate

Abstract This paper investigates the effects of the adoption of inflation targeting (IT) on the choice of exchange rate regime in emerging markets (EMs), conditional on certain macroeconomic conditions. Using a large sample of EMs and after dampening the endogeneity of the adoption of IT using a selection on observables, we find that IT countries on average have a relatively more flexible exchange rate regime than other EMs. However, the flexibility of the exchange rate regime shows strong heterogeneity among IT countries. IT countries with low trade and financial openness and with a large share of external debt exhibit a lower exchange rate flexibility than others. Moreover, the marginal effect of IT adoption on the exchange rate flexibility increases with the duration of the IT regime in place, and with the propensity scores to adopt it.

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