Richer countries benefit more from flexible exchange rates concluded Aasim Husain, Ashoka Mody, and Kenneth S. Rogoff in their NBER Working Paper Exchange Rate Regime Durability and Performance in Developing Versus Advanced Economies (No. 10673, August 2004), later published in the Journal of Monetary Economics (January 2005).
“Drawing on new data and advances in exchange rate regimes’ classification, we find that countries appear to benefit by having increasingly flexible exchange rate systems as they become richer and more financially developed. For developing countries with little exposure to international capital markets, pegs are notable for their durability and relatively low inflation. In contrast, for advanced economies, floats are distinctly more durable and also appear to be associated with higher growth. For emerging markets, our results parallel the Baxter and Stockman classic exchange regime neutrality result, though pegs are the least durable and expose countries to higher risk of crisis.”
This may have something to do with emerging economies being often smaller in size, thus more open, and trading more with a dominant partner in exchange, thus fullfilling some of the basic conditions for being included in a common currency zone.
No comments:
Post a Comment