Explaining the Transition between Exchange Rate Regimes


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  • This paper studies the transition between exchange rate regimes using a Markov chain model with time-varying transition probabilities. The probabilities are parameterized as nonlinear functions of variables suggested by the currency crisis and optimal currency area literature. Results using annual data indicate that inflation, and to a lesser extent, output growth and trade openness help explain the exchange rate regime transition dynamics.

fecha de publicación

  • 2003

Líneas de investigación

  • Exchange Rates
  • Floating
  • Hollowing Out Hypothesis
  • Markov Chains
  • Regime Change


  • 2003-21