TY  - JOUR
AU  - Calvo,Guillermo A.
AU  - Reinhart,Carmen M.
TI  - Fear of Floating
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 7993
PY  - 2000
Y2  - November 2000
UR  - http://www.nber.org/papers/w7993
L1  - http://www.nber.org/papers/w7993.pdf
N1  - Author contact info:
Guillermo A. Calvo
Columbia University
School of International and Public Affairs
420 West 118th St, Room 1303B
MC3332
New York, NY 10027
Tel: 212/854-4264
E-Mail: gc2286@columbia.edu

Carmen M. Reinhart
Peterson Institute for International Economics
1750 Massachusetts Avenue, NW
Washington, DC 20036-1903
Tel: 202-454-1325
Fax: 202-659-3225
E-Mail: creinhart@piie.com
AB  - In recent years, many countries have suffered severe financial crises, producing a staggering toll on their economies, particularly in emerging markets. One view blames fixed exchange rates-- soft pegs'--for these meltdowns.  Adherents to that view advise countries to allow their currency to float. We analyze the behavior of exchange rates, reserves, the monetary aggregates, interest rates, and commodity prices across 154 exchange rate arrangements to assess whether  official labels' provide an adequate representation of actual country practice. We find that, countries that say they allow their exchange rate to float mostly do not--there seems to be an epidemic case of  fear of floating.' Since countries that are classified as having a free or a managed float mostly resemble noncredible pegs--the so-called  demise of fixed exchange rates' is a myth--the fear of floating is pervasive, even among some of the developed countries. We present an analytical framework that helps to understand why there is fear of floating.
ER  -