Munich Personal RePEc Archive

Grooming Classifications: Exchange Rate Regimes and Growth in Transition Economies

Petreski, Marjan (2014): Grooming Classifications: Exchange Rate Regimes and Growth in Transition Economies. Forthcoming in: Eastern European Economics

[img]
Preview
PDF
MPRA_paper_54473.pdf

Download (787kB) | Preview

Abstract

The objective of this paper is to test the exchange rate regime – growth nexus in transition economies by looking if and how some inherent characteristics of the transition process might have affected the de-facto classifications of exchange rate regimes. 28 transition countries of Central and Eastern Europe and the Commonwealth of Independent States are investigated over 1991-2007 and three de facto classifications of exchange rate regimes are considered. As usual in the empirical literature, initially, the exchange rate regime effect on growth differs across classifications. However, further investigation suggests that the three classifications usually disagree around some inherent characteristics of the transition process, like the higher trade openness of the countries, the episodes of high inflation and the bank system reform and interest rate liberalization. Results indicate that high inflation likely determined disagreement in early transition, while trade openness and interest rate liberalization in late transition. After classifications have been cleaned of the disagreeing points, the final results, corrected for the potential selectivity bias, suggest that both pegs and intermediate regimes of all three classifications significantly outperform floats in terms of economic growth, the average effect being slightly lower for pegs.

UB_LMU-Logo
MPRA is a RePEc service hosted by
the Munich University Library in Germany.