Exchange Rate Regimes
Choices and Consequences
240 pp., 6 x 9 in, 27 illus.
- Published: January 17, 2003
- Publisher: The MIT Press
An empirical study of exchange rate regimes based on data compiled from 150 member countries of the International Monetary Fund over the past thirty years.
Few topics in international economics are as controversial as the choice of an exchange rate regime. Since the breakdown of the Bretton Woods system in the early 1970s, countries have adopted a wide variety of regimes, ranging from pure floats at one extreme to currency boards and dollarization at the other. While a vast theoretical literature explores the choice and consequences of exchange rate regimes, the abundance of possible effects makes it difficult to establish clear relationships between regimes and common macroeconomic policy targets such as inflation and growth.
This book takes a systematic look at the evidence on macroeconomic performance under alternative exchange rate regimes, drawing on the experience of some 150 member countries of the International Monetary Fund over the past thirty years. Among other questions, it asks whether pegging the exchange rate leads to lower inflation, whether floating exchange rates are associated with faster output growth, and whether pegged regimes are particularly prone to currency and other crises. The book draws on history and theory to delineate the debate and on standard statistical methods to assess the empirical evidence, and includes a CD-ROM containing the data set used.
Thirty years after the exchange rate rules of the postwar monetary system broke down, debate continues on the merits of fixed versus floating rates, as well as intermediate arrangements. Ghosh, Gulde, and Wolf thoroughly examine national economic performance since the mid-1970s. Their findings produce useful empirical generalizations on the pros and cons for each side, making the book a new benchmark in the ongoing debate.
Richard N. Cooper, Boas Professor of International Economics, Harvard University
This book succinctly presents a historical, theoretical, and empirical discussion of the performance of alternative exchange rate arrangements. It will be of great value to professional economists and policymakers worldwide in helping them to choose the best exchange rate system for their countries.
Michael D. Bordo, Professor of Economics, Rutgers University
Exchange rate theory and practice has long been an area of confusion. Ghosh, Gulde, and Wolf have illuminated the issues by taking a hard look at the empirical evidence, with interesting and surprising results. I hope that their work will help to stimulate a rethinking of the broader question of an appropriate international exchange rate system.
Paul A. Volcker, Former Chairman of the Board of Governors, United States Federal Reserve System