Determinants Of Exchange Rate Regime Switching

摘要

establish the variables that determine these probabilities. We find strong evidence that the economy's balance sheet and economic performance determine the likelihood of switching in the exchange rate regime. Specifically, an increase in reserve currency debt relative to assets raises potential capital losses from devaluation and reduces the probability of switching to a low intervention regime, as does a decline in growth. The purpose here is not to present an alternative regime classification (Levy-Yeyati, E., Sturzenegger, S., 2005. Classifying exchange rate regimes: deeds vs. words. European Economic Review 49, 1603-1635; Reinhart, C.M., Rogoff, K., 2004. The modern history of exchange rate arrangements: a reinterpretation. Quarterly Journal of Economics, Available at: http://www.puaf.umd.edu/faculty/papers/reinhart/papers.htm), but to establish the relative importance of different constraints on the central bank, which has policy implications. The empirical approach and specification is flexible to whether intervention is discrete or gradual and to whether or not the central bank sterilizes.