New Developments of the Exchange Rate Regimes in Developing by Hisayuki Mitsuo (eds.)

By Hisayuki Mitsuo (eds.)

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First, they verify whether there existed a unified rate or dual or multiple rates, or parallel markets, by using detailed country chronologies. Second, if there is no dual or parallel market, they check if there is an official announcement for the exchange rate. If there is, they confirm whether the announced exchange rate passes a statistical verification test. If the regime is verified, it is classified as a peg, band, and so on. If the announcement fails verification, they statistically classify the regime by using their de facto statistical sort.

Following the new IMF classification system, Bubula and Ötker-Robe (2002) accordingly constructed historical (monthly and annual) data on de facto regimes for all the IMF member countries for the period from 1990 to 2001. As in the new IMF classification, they classify the members’ regimes on the basis of the degree of flexibility of the arrangement or a formal or informal commitment to a given exchange rate path. This classification is also based on information obtained through provision of technical assistance to member countries and regular contact with IMF country economists.

Similarly, in the case of a high level of passthrough from exchange rates to prices, as depreciation can substantially raise domestic prices, the authorities limit exchange rate movements through heavy intervention even if they claim to have floating regimes. 28 Moreover, it may be thought that the levels of the pass-through in emerging market economies and developing countries are higher than those in developed countries. Hence, the results for the rates of fear of floating may be related to the cause of the behavior of fear of floating suggested by Calvo and Reinhart (2002) and Hausmann et al.

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