The modern history of exchange rate arrangements: A reinterpretation

Reinhart, Carmen and Rogoff, Kenneth (2004): The modern history of exchange rate arrangements: A reinterpretation. Published in: Quarterly Journal of Economics , Vol. CXIX, No. 1 (February 2004): pp. 1-48.

Abstract

We develop a novel system of reclassifying historical exchange rate regimes. One key difference between our study and previous classifications is that we employ monthly data on market-determined parallel exchange rates going back to 1946 for 153 countries. Our approach differs from the IMF official classification (which we show to be only a little better than random), it also differs radically from all previous attempts at historical reclassification. Our classification points to a rethinking of economic performance under alternative exchange rate regimes. Indeed, the breakup of Bretton Woods had less impact on exchange rate regimes than is popularly believed.

• Item Type: MPRA Paper
• Language: English
• Keywords: exchange rates pegs parallel markets floating currency crashes
• Subjects: E - Macroeconomics and Monetary Economics > E3 - Prices, Business Fluctuations, and Cycles > E31 - Price Level ; Inflation ; Deflation; F - International Economics > F3 - International Finance > F31 - Foreign Exchange; F - International Economics > F3 - International Finance > F33 - International Monetary Arrangements and Institutions

References

Bahmani-Oskooee, Mohsen, Ilir Miteza, and A.B.M. Nasir, “The Long-run Relationship Between Black Market and Official Exchange Rates: Evidence from Panel Cointegration,” Economics Letters, LXXVI (2002), 397-404.

Baxter, Marianne, and Alan Stockman, “Business Cycle and Exchange Rate Regime: Some International Evidence,” Journal of Monetary Economics, XXIII (1989), 377-400.

Bordo, Michael, “The Bretton Woods International Monetary System: A Historical Overview,” in A Retrospective on the Bretton Woods System Michael Bordo and Barry Eichengreen, eds.(Chicago, IL: University of Chicago Press, 1993) 3-98.

Bordo, Michael, “Exchange Rate Regimes in Historical Perspective,” National Bureau of Economic Research Working Paper No. 9654, (2003).

Cagan, Philip, “The Monetary Dynamics of Hyperinflation,” in Studies in the Quantity Theory of Money, Milton Friedman, ed. (Chicago, IL: University of Chicago Press, 1956), 25-117.

Calvo, Guillermo A., and Carmen M. Reinhart, “Fear of Floating,” Quarterly Journal of Economics, CXVII (2002), 379-408.

Chen,Yu-chin, and Kenneth S. Rogoff, “Commodity Currencies,” Journal of International Economics, VX (2003), 133-160.

Claessens, Stijn, “Estimates of Capital Flight and Its Behavior,” Revista de Análisis Económico, XII (1997), 3-34.

de Vries, Margaret G., “Multiple Exchange Rates” in The International Monetary Fund 1945-1965 Margaret de Vries and J. Keith Horsefield, eds. (Washington DC: International Monetary Fund, 1969), 122-151.

Easterly, William, The Elusive Quest for Growth (Cambridge, MA: MIT Press, 2001).

Frankel, Jeffrey A., and Andrew K. Rose, “Currency Crashes in Emerging Markets: An Empirical Treatment,” Journal of International Economics, XXXXI (1996), 351-368.

Ghei, Nita, Miguel A. Kiguel, and Stephen A. O’Connell, “Parallel Exchange Rates in Developing Countries: Lessons from Eight Case Studies” in Parallel Exchange Rates in Developing Countries Miguel Kiguel, J. Saul Lizondo, and Stephen O’Connell, eds. (New York, NY: Saint Martin’s Press, 1997), 17-76.

Gosh, Atish, Anne-Marie Gulde, Jonathan Ostry, and Holger Wolfe, “Does the Nominal Exchange Rate Regime Matter?, National Bureau of Economic Research Working Paper No. 5874, (1997).

Kiguel, Miguel, J. Saul Lizondo, and Stephen A. O’Connell, eds. Parallel Exchange Rates in Developing Countries (New York, NY: Saint Martin’s Press, 1997).

International Monetary Fund, various issues, Annual Report on Exchange Restrictions (Washington DC: International Monetary Fund, 1949-1978).

International Monetary Fund, various issues, Annual Report on Exchange Arrangements and Exchange Restriction, (Washington DC: International Monetary Fund, 1979-2001).

International Currency Analysis, various issues, World Currency Yearbook (New York, NY: International Currency Analysis, 1983-1998).

Levy-Yeyati, Eduardo, and Federico Sturzeneger, “Classifying Exchange Rate Regimes: Deeds versus Words” mimeo, Universidad Torcuato Di Tella (2002).

Marion, Nancy P., “Dual Exchange Rates in Europe and Latin America,” World Bank Economic Review, VIII (1994), 213-245.

Pick, Franz, various issues, World Currency Reports (New York, NY: Pick Publishing Corporation, 1945-1955).

Pick, Franz, various issues, Black Market Yearbook (New York, NY: Pick Publishing Corporation, 1951-1955).

Pick, Franz, various issues, Pick’s Currency Yearbook (New York, NY: Pick Publishing Corporation, 1955-1982).

Pick, Franz, various issues, World Currency Reports (New York, NY: International Currency Analysis Inc., 1983-1998).

Pick, Franz, and René Sédillot, All the Monies of the World: A Chronicle of Currency Values, (New York, NY: Pick Publishing Corporation, 1971).

Reinhart, Carmen M., and Kenneth S. Rogoff “A Modern History of Exchange Rate Arrangements: A Reinterpretation,” National Bureau of Economic Research Working Paper No. 8963, (2001).

Reinhart, Carmen M., and Kenneth S. Rogoff, “Parts I and II. Background Material to A Modern History of Exchange Rate Arrangements: A Reinterpretation,” mimeo, International Monetary Fund, Washington DC, 2003 at http://terpconnect.umd.edu/~creinhar/Papers.html

Reinhart, Carmen M., Kenneth S. Rogoff, and Miguel A. Savastano, “Addicted to Dollars,” mimeo, International Monetary Fund, Washington DC, 2003.

Reinhart, Carmen M., Kenneth S. Rogoff, and Antonio Spilimbergo, “When Hard Shocks Hit Soft Pegs,” mimeo, International Monetary Fund, Washington DC, 2003.