Does the Exchange Rate Regime Affect Macroeconomic Performance : Evidence from Transition Economics

To examine whether a country's exchange rate regime has any impact on inflation and growth performance in transition economies, the authors develop an empirical framework that addresses some of the main problems plaguing empirical work in this...

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Main Authors: Domac, Ilker, Peters, Kyle, Yuzefovich, Yevgeny
Format: Policy Research Working Paper
Language:English
en_US
Published: World Bank, Washington, DC 2014
Subjects:
GDP
Online Access:http://documents.worldbank.org/curated/en/2001/07/1552022/exchange-rate-regime-affect-macroeconomic-performance-evidence-transition-economics
http://hdl.handle.net/10986/19572
id okr-10986-19572
recordtype oai_dc
spelling okr-10986-195722021-04-23T14:03:43Z Does the Exchange Rate Regime Affect Macroeconomic Performance : Evidence from Transition Economics Domac, Ilker Peters, Kyle Yuzefovich, Yevgeny ADVERSE EFFECTS AGGREGATE DEMAND BALANCE OF PAYMENTS BALANCE OF PAYMENTS STATISTICS BANKING CRISES BASKET OF CURRENCIES BUDGET DEFICIT BUDGET DEFICITS CAPITAL ACCOUNT CAPITAL FLOWS CAPITAL INFLOWS CAPITAL MARKETS CAPITAL MOBILITY CENTRAL BANK CENTRAL PLANNING COUNTRIES COUNTRY SPECIFIC CRISIS EPISODES CURRENCY CURRENCY BOARD CURRENCY BOARDS CURRENCY PEGS CURRENT ACCOUNT CURRENT ACCOUNT DEFICIT DEREGULATION DEVELOPED COUNTRIES DEVELOPING COUNTRIES DEVELOPING WORLD DOMESTIC ECONOMY ECONOMIC ACTIVITY ECONOMIC LITERATURE ECONOMIC OBJECTIVES ECONOMIC STUDIES ECONOMICS EMERGING ECONOMIES EMERGING MARKETS EMPIRICAL EVIDENCE EMPIRICAL LITERATURE EMPIRICAL RESULTS EMPIRICAL STUDIES EMPIRICAL WORK ERROR TERM EURO EXCESS DEMAND EXCHANGE RATE EXCHANGE RATE ARRANGEMENTS EXCHANGE RATE CHANGES EXCHANGE RATE FLEXIBILITY EXCHANGE RATE POLICIES EXCHANGE RATE POLICY EXCHANGE RATE REGIME EXCHANGE RATE REGIMES EXCHANGE RATES EXPORTS FINANCIAL DEPTH FINANCIAL ENVIRONMENT FINANCIAL INSTITUTIONS FINANCIAL MARKETS FINANCIAL POLICIES FISCAL DEFICIT FIXED EXCHANGE RATE FIXED EXCHANGE RATES FLEXIBLE EXCHANGE RATES FLOATING EXCHANGE RATE FLOATING EXCHANGE RATES FLOATING RATES FOREIGN EXCHANGE FOREIGN EXCHANGE MARKET FOREIGN SHOCKS GDP GOVERNMENT EXPENDITURES GROWTH EQUATION GROWTH PERFORMANCE INCOME INDEXATION INFLATION INFLATION PERFORMANCE INFLATION RATE INFLATION RATES INTEREST RATES INTERMEDIATE REGIMES INTERNATIONAL MARKETS INTERNATIONAL TRADE INTERNATIONAL TRANSACTIONS MACROECONOMIC CONDITIONS MACROECONOMIC IMPLICATIONS MACROECONOMIC OUTCOMES MACROECONOMIC PERFORMANCE MACROECONOMIC POLICIES MACROECONOMIC STABILIZATION MACROECONOMIC VARIABLES MONETARY POLICY MONEY CREATION MONEY DEMAND MONEY SUPPLY NOMINAL ANCHOR NOMINAL EXCHANGE RATE NOMINAL EXCHANGE RATES OPEN ECONOMIES OUTPUT GROWTH OUTPUT VOLATILITY POLICY MAKERS POLICY RESEARCH POLICY VARIABLES POVERTY REDUCTION PRICE CONTROLS PRIVATE SECTOR REAL EXCHANGE REAL EXCHANGE RATE REAL EXCHANGE RATE VOLATILITY REAL OUTPUT REAL TERMS RESERVES SDR PEGS SEIGNIORAGE SIGNIFICANT IMPACT SOFT PEGS STABILIZATION PROGRAMS TELECOMMUNICATIONS TERMS OF TRADE TRANSITION TRANSITION COUNTRIES TRANSITION ECONOMIES TRANSITION PROCESS VULNERABILITY To examine whether a country's exchange rate regime has any impact on inflation and growth performance in transition economies, the authors develop an empirical framework that addresses some of the main problems plaguing empirical work in this strand of the literature: the Lucas critique, the endogeneity of the exchange rate regime, and the sample selection problem. Empirical results demonstrate that the exchange rate regime does affect inflation performance. the results suggest that: 1) Transition countries with intermediate arrangements might reduce inflation if they were to adopt a fixed regime. 2) Switching from a floating regime to an intermediate regime might not reduce inflation. 3) An unanticipated float--when a country whose fundamentals make it unlikely to adopt another regime adopts a floating regime--results in lower inflation. Based on their results, it is not possible to infer more about one particular exchange rate regime being superior to another in terms of growth performance. But empirical findings do underscore the different effects that policy variables--and other variables influencing economic activity--have on growth under different exchange-rate arrangements. 2014-08-21T18:07:00Z 2014-08-21T18:07:00Z 2001-07 http://documents.worldbank.org/curated/en/2001/07/1552022/exchange-rate-regime-affect-macroeconomic-performance-evidence-transition-economics http://hdl.handle.net/10986/19572 English en_US Policy Research Working Paper;No. 2642 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo/ World Bank, Washington, DC Publications & Research :: Policy Research Working Paper Publications & Research
repository_type Digital Repository
institution_category Foreign Institution
institution Digital Repositories
building World Bank Open Knowledge Repository
collection World Bank
language English
en_US
topic ADVERSE EFFECTS
AGGREGATE DEMAND
BALANCE OF PAYMENTS
BALANCE OF PAYMENTS STATISTICS
BANKING CRISES
BASKET OF CURRENCIES
BUDGET DEFICIT
BUDGET DEFICITS
CAPITAL ACCOUNT
CAPITAL FLOWS
CAPITAL INFLOWS
CAPITAL MARKETS
CAPITAL MOBILITY
CENTRAL BANK
CENTRAL PLANNING
COUNTRIES
COUNTRY SPECIFIC
CRISIS EPISODES
CURRENCY
CURRENCY BOARD
CURRENCY BOARDS
CURRENCY PEGS
CURRENT ACCOUNT
CURRENT ACCOUNT DEFICIT
DEREGULATION
DEVELOPED COUNTRIES
DEVELOPING COUNTRIES
DEVELOPING WORLD
DOMESTIC ECONOMY
ECONOMIC ACTIVITY
ECONOMIC LITERATURE
ECONOMIC OBJECTIVES
ECONOMIC STUDIES
ECONOMICS
EMERGING ECONOMIES
EMERGING MARKETS
EMPIRICAL EVIDENCE
EMPIRICAL LITERATURE
EMPIRICAL RESULTS
EMPIRICAL STUDIES
EMPIRICAL WORK
ERROR TERM
EURO
EXCESS DEMAND
EXCHANGE RATE
EXCHANGE RATE ARRANGEMENTS
EXCHANGE RATE CHANGES
EXCHANGE RATE FLEXIBILITY
EXCHANGE RATE POLICIES
EXCHANGE RATE POLICY
EXCHANGE RATE REGIME
EXCHANGE RATE REGIMES
EXCHANGE RATES
EXPORTS
FINANCIAL DEPTH
FINANCIAL ENVIRONMENT
FINANCIAL INSTITUTIONS
FINANCIAL MARKETS
FINANCIAL POLICIES
FISCAL DEFICIT
FIXED EXCHANGE RATE
FIXED EXCHANGE RATES
FLEXIBLE EXCHANGE RATES
FLOATING EXCHANGE RATE
FLOATING EXCHANGE RATES
FLOATING RATES
FOREIGN EXCHANGE
FOREIGN EXCHANGE MARKET
FOREIGN SHOCKS
GDP
GOVERNMENT EXPENDITURES
GROWTH EQUATION
GROWTH PERFORMANCE
INCOME
INDEXATION
INFLATION
INFLATION PERFORMANCE
INFLATION RATE
INFLATION RATES
INTEREST RATES
INTERMEDIATE REGIMES
INTERNATIONAL MARKETS
INTERNATIONAL TRADE
INTERNATIONAL TRANSACTIONS
MACROECONOMIC CONDITIONS
MACROECONOMIC IMPLICATIONS
MACROECONOMIC OUTCOMES
MACROECONOMIC PERFORMANCE
MACROECONOMIC POLICIES
MACROECONOMIC STABILIZATION
MACROECONOMIC VARIABLES
MONETARY POLICY
MONEY CREATION
MONEY DEMAND
MONEY SUPPLY
NOMINAL ANCHOR
NOMINAL EXCHANGE RATE
NOMINAL EXCHANGE RATES
OPEN ECONOMIES
OUTPUT GROWTH
OUTPUT VOLATILITY
POLICY MAKERS
POLICY RESEARCH
POLICY VARIABLES
POVERTY REDUCTION
PRICE CONTROLS
PRIVATE SECTOR
REAL EXCHANGE
REAL EXCHANGE RATE
REAL EXCHANGE RATE VOLATILITY
REAL OUTPUT
REAL TERMS
RESERVES
SDR PEGS
SEIGNIORAGE
SIGNIFICANT IMPACT
SOFT PEGS
STABILIZATION PROGRAMS
TELECOMMUNICATIONS
TERMS OF TRADE
TRANSITION
TRANSITION COUNTRIES
TRANSITION ECONOMIES
TRANSITION PROCESS
VULNERABILITY
spellingShingle ADVERSE EFFECTS
AGGREGATE DEMAND
BALANCE OF PAYMENTS
BALANCE OF PAYMENTS STATISTICS
BANKING CRISES
BASKET OF CURRENCIES
BUDGET DEFICIT
BUDGET DEFICITS
CAPITAL ACCOUNT
CAPITAL FLOWS
CAPITAL INFLOWS
CAPITAL MARKETS
CAPITAL MOBILITY
CENTRAL BANK
CENTRAL PLANNING
COUNTRIES
COUNTRY SPECIFIC
CRISIS EPISODES
CURRENCY
CURRENCY BOARD
CURRENCY BOARDS
CURRENCY PEGS
CURRENT ACCOUNT
CURRENT ACCOUNT DEFICIT
DEREGULATION
DEVELOPED COUNTRIES
DEVELOPING COUNTRIES
DEVELOPING WORLD
DOMESTIC ECONOMY
ECONOMIC ACTIVITY
ECONOMIC LITERATURE
ECONOMIC OBJECTIVES
ECONOMIC STUDIES
ECONOMICS
EMERGING ECONOMIES
EMERGING MARKETS
EMPIRICAL EVIDENCE
EMPIRICAL LITERATURE
EMPIRICAL RESULTS
EMPIRICAL STUDIES
EMPIRICAL WORK
ERROR TERM
EURO
EXCESS DEMAND
EXCHANGE RATE
EXCHANGE RATE ARRANGEMENTS
EXCHANGE RATE CHANGES
EXCHANGE RATE FLEXIBILITY
EXCHANGE RATE POLICIES
EXCHANGE RATE POLICY
EXCHANGE RATE REGIME
EXCHANGE RATE REGIMES
EXCHANGE RATES
EXPORTS
FINANCIAL DEPTH
FINANCIAL ENVIRONMENT
FINANCIAL INSTITUTIONS
FINANCIAL MARKETS
FINANCIAL POLICIES
FISCAL DEFICIT
FIXED EXCHANGE RATE
FIXED EXCHANGE RATES
FLEXIBLE EXCHANGE RATES
FLOATING EXCHANGE RATE
FLOATING EXCHANGE RATES
FLOATING RATES
FOREIGN EXCHANGE
FOREIGN EXCHANGE MARKET
FOREIGN SHOCKS
GDP
GOVERNMENT EXPENDITURES
GROWTH EQUATION
GROWTH PERFORMANCE
INCOME
INDEXATION
INFLATION
INFLATION PERFORMANCE
INFLATION RATE
INFLATION RATES
INTEREST RATES
INTERMEDIATE REGIMES
INTERNATIONAL MARKETS
INTERNATIONAL TRADE
INTERNATIONAL TRANSACTIONS
MACROECONOMIC CONDITIONS
MACROECONOMIC IMPLICATIONS
MACROECONOMIC OUTCOMES
MACROECONOMIC PERFORMANCE
MACROECONOMIC POLICIES
MACROECONOMIC STABILIZATION
MACROECONOMIC VARIABLES
MONETARY POLICY
MONEY CREATION
MONEY DEMAND
MONEY SUPPLY
NOMINAL ANCHOR
NOMINAL EXCHANGE RATE
NOMINAL EXCHANGE RATES
OPEN ECONOMIES
OUTPUT GROWTH
OUTPUT VOLATILITY
POLICY MAKERS
POLICY RESEARCH
POLICY VARIABLES
POVERTY REDUCTION
PRICE CONTROLS
PRIVATE SECTOR
REAL EXCHANGE
REAL EXCHANGE RATE
REAL EXCHANGE RATE VOLATILITY
REAL OUTPUT
REAL TERMS
RESERVES
SDR PEGS
SEIGNIORAGE
SIGNIFICANT IMPACT
SOFT PEGS
STABILIZATION PROGRAMS
TELECOMMUNICATIONS
TERMS OF TRADE
TRANSITION
TRANSITION COUNTRIES
TRANSITION ECONOMIES
TRANSITION PROCESS
VULNERABILITY
Domac, Ilker
Peters, Kyle
Yuzefovich, Yevgeny
Does the Exchange Rate Regime Affect Macroeconomic Performance : Evidence from Transition Economics
relation Policy Research Working Paper;No. 2642
description To examine whether a country's exchange rate regime has any impact on inflation and growth performance in transition economies, the authors develop an empirical framework that addresses some of the main problems plaguing empirical work in this strand of the literature: the Lucas critique, the endogeneity of the exchange rate regime, and the sample selection problem. Empirical results demonstrate that the exchange rate regime does affect inflation performance. the results suggest that: 1) Transition countries with intermediate arrangements might reduce inflation if they were to adopt a fixed regime. 2) Switching from a floating regime to an intermediate regime might not reduce inflation. 3) An unanticipated float--when a country whose fundamentals make it unlikely to adopt another regime adopts a floating regime--results in lower inflation. Based on their results, it is not possible to infer more about one particular exchange rate regime being superior to another in terms of growth performance. But empirical findings do underscore the different effects that policy variables--and other variables influencing economic activity--have on growth under different exchange-rate arrangements.
format Publications & Research :: Policy Research Working Paper
author Domac, Ilker
Peters, Kyle
Yuzefovich, Yevgeny
author_facet Domac, Ilker
Peters, Kyle
Yuzefovich, Yevgeny
author_sort Domac, Ilker
title Does the Exchange Rate Regime Affect Macroeconomic Performance : Evidence from Transition Economics
title_short Does the Exchange Rate Regime Affect Macroeconomic Performance : Evidence from Transition Economics
title_full Does the Exchange Rate Regime Affect Macroeconomic Performance : Evidence from Transition Economics
title_fullStr Does the Exchange Rate Regime Affect Macroeconomic Performance : Evidence from Transition Economics
title_full_unstemmed Does the Exchange Rate Regime Affect Macroeconomic Performance : Evidence from Transition Economics
title_sort does the exchange rate regime affect macroeconomic performance : evidence from transition economics
publisher World Bank, Washington, DC
publishDate 2014
url http://documents.worldbank.org/curated/en/2001/07/1552022/exchange-rate-regime-affect-macroeconomic-performance-evidence-transition-economics
http://hdl.handle.net/10986/19572
_version_ 1764440044688375808