TY  - JOUR
AU  - Calvo,Guillermo
AU  - Mishkin,Frederic S.
TI  - The Mirage of Exchange Rate Regimes for Emerging Market Countries
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 9808
PY  - 2003
Y2  - June 2003
UR  - http://www.nber.org/papers/w9808
L1  - http://www.nber.org/papers/w9808.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

Frederic S. Mishkin
Columbia University
Graduate School of Business
Uris Hall 817
3022 Broadway
New York, NY 10027
Tel: 212-854-3488
Fax: 212/662-8474
E-Mail: fsm3@columbia.edu
AB  - 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.
ER  -