Munich Personal RePEc Archive

Choosing and assessing exchange rate regimes: A survey of the literature

Cruz Rodriguez, Alexis (2009): Choosing and assessing exchange rate regimes: A survey of the literature.

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Abstract

This paper explore more than 30 years of ideas on the issues surrounding the selection and assessment of exchange rate regimes. It will attempt to provide a comprehensive overview on the theoretical and empirical analysis of the selection and assessment of exchange rate regimes, exposing and interpreting those areas which, from our point of view, are representative of the most influential contributions in this context. The literature can be divided into two main groups: classical and modern. The first group refers to earlier studies examining the differences between floating and fixed exchange rate regimes based on the nature of the shocks and on the OCA theory. The second group is focused on the trade-off between credibility and flexibility, the economic performance and currency crisis, among others. In addition, this paper reviews why many countries follow de facto regimes different from their de jure regimes, that is, declaring different regimes to the actual regimes in place. Finally, this paper reviews the more recent empirical criteria that have been used to evaluate the choice of an optimal exchange regime.

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