NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

The Mirage of Exchange Rate Regimes for Emerging Market Countries

Guillermo Calvo, Frederic S. Mishkin

NBER Working Paper No. 9808
Issued in June 2003
NBER Program(s):   IFM   ME

This paper argues that much of the debate on choosing an exchange rate regime misses the boat. It begins by discussing the standard theory of choice between exchange rate regimes, and then explores the weaknesses in this theory, especially when it is applied to emerging market economies. It then discusses a range of institutional traits that might predispose a country to favor either fixed or floating rates, and then turns to the converse question of whether the choice of exchange rate regime may favor the development of certain desirable institutional traits. The conclusion from the analysis is that the choice of exchange rate regime is likely to be of second order importance to the development of good fiscal, financial, and monetary institutions in producing macroeconomic success in emerging market countries. This suggests that less attention should be focused on the general question whether a floating or a fixed exchange rate is preferable, and more on these deeper institutional arrangements. A focus on institutional reforms rather than on the exchange rate regime may encourage emerging market countries to be healthier and less prone to the crises that we have seen in recent years.

download in pdf format
   (279 K)

email paper

This paper is available as PDF (279 K) or via email.

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w9808

Published: Calvo, Guillermo A. and Frederic S. Mishkin. "The Mirage Of Exchange Rate Regimes For Emerging Market Countries," Journal of Economic Perspectives, 2003, v17(4,Fall), 99-118.

Users who downloaded this paper also downloaded these:
Devereux and Engel w6867 Fixed vs. Floating Exchange Rates: How Price Setting Affects the Optimal Choice of Exchange-Rate Regime
Cespedes, Chang, and Velasco w9337 IS-LM-BP in the Pampas
Frankel w7338 No Single Currency Regime is Right for All Countries or At All Times
Eichengreen and Hausman w7418 Exchange Rates and Financial Fragility
Reinhart and Rogoff w8963 The Modern History of Exchange Rate Arrangements: A Reinterpretation
 
Publications
Activities
Meetings
Data
People
About

Support
National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us