Fear of floating

Reinhart, Carmen and Calvo, Guillermo (2002): Fear of floating. Published in: Quarterly Journal of Economics , Vol. 117, No. 2 (May 2002): pp. 379-408.

Abstract

Many emerging market countries have suffered financial crises. One view blames soft pegs for these crises. Adherents to that view suggest that countries move to corner solutions--hard pegs or floating exchange rates. We analyze the behavior of exchange rates, reserves, and interest rates to assess whether there is evidence that country practice is moving toward corner solutions. We focus on whether countries that claim they are floating are indeed doing so. We find that countries that say they allow their exchange rate to float mostly do not--there seems to be an epidemic case of “fear of floating.”

• Item Type: MPRA Paper
• Language: English
• Keywords: exchange rates pegs reserves interest rates credibility fear of floating
• Subjects: E - Macroeconomics and Monetary Economics > E4 - Money and Interest Rates > E42 - Monetary Systems ; Standards ; Regimes ; Government and the Monetary System ; Payment Systems; F - International Economics > F3 - International Finance > F30 - General; F - International Economics > F3 - International Finance > F31 - Foreign Exchange

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