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Determinants of the Choice of Exchange Rate Regimes in Six Central American Countries: An Empirical Analysis
Author:
Mr. Michael G. Papaioannou
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Series:
IMF Working Papers
Volume/Issue:
Volume 2003: Issue 059
Language:
English
Publication Date:
01 Mar 2003
DOI:
https://doi.org/10.5089/9781451847963.001
ISBN:
9781451847963
ISSN:
1018-5941
Pages:
28
Keywords:
WP; regime; country; regime classification; consequence; GDP; Exchange Rate Regimes; Central American Countries; crawling peg regime; nonpegging regime; exchange rate regime classification; peg regime; floating regime; moving average; Central American country; variety of exchange rate regime classification; exchange rate volatility; flexible regime; nominal exchange rate; Exchange rate arrangements; Crawling peg; Conventional peg; Floating exchange rates; Exchange rates; Central America
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IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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This paper examines whether decisions about the appropriate exchange rate regime in six Central American countries were based on longer-run economic fundamentals or on the confluence of historical and political circumstances. To uncover any actual relationship both across countries and across time, we estimate several probit and multinomial logit models of exchange rate regime choice with data spanning the period 1974-2001. We find that theoretical long-run determinants, such as trade openness, export share with the major trading partner, economic size, and per capita income, are adequate, but not robust, predictors of exchange rate regime choice. However, we were not able to establish a statistically significant association between the terms of trade fluctuations or capital account openness and a particular regime in any specification using our sample.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund