Exchange Rate Management and Crisis Susceptibility: A Reassessment
IMF Working Papers, January 24, 2014
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Bibliographic details
- Authors: Atish R. Ghosh, Jonathan David Ostry, Mahvash S Qureshi
- Published: January 24, 2014
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781484383971.001
Summary findings
- Research question: whether the poles of hard pegs and pure floats are still safer than the middle, and where to draw the line between safe floats and risky intermediate regimes.
- Sample and period: a sample of 50 EMEs over 1980-2011.
- Main conclusion: macroeconomic and financial vulnerabilities are significantly greater under less flexible intermediate regimes—including hard pegs—as compared to floats.
- Hard pegs: not especially susceptible to banking or currency crises, but significantly more prone to growth collapses, suggesting the security of the hard end of the bipolar prescription is largely illusory.
- Intermediate regimes (as a class): the most susceptible to crises.
- Managed floats (a subclass within intermediate regimes): behave much more like pure floats, with significantly lower risks and fewer crises.
- Conceptual note: “managed floating” is a nebulous concept; characterization of more crisis prone regimes suggests no simple dividing line between safe floats and risky intermediate regimes.
Evidence and methodology (scope)
- Sample size and coverage: 50 emerging market economies (EMEs).
- Time coverage: 1980-2011.
- Outcomes examined: banking crises, currency crises, growth collapses, macroeconomic and financial vulnerabilities.
- Regime classification emphasis: contrasts pure floats, managed floats (a subclass), intermediate regimes, and hard pegs.
Key statistics and publication metadata
- Sample described as: "a sample of 50 EMEs over 1980-2011."
- Pages: 46
- Volume: 2014
- Issue: 011
- Series: Working Paper No. 2014/011
- DOI: https://doi.org/10.5089/9781484383971.001
- Stock No: WPIEA2014011
- ISBN: 9781484383971
- ISSN: 1018-5941
- Authors: Atish R. Ghosh, Jonathan David Ostry, Mahvash S Qureshi
- Publication date: January 24, 2014
Policy implications and interpretation
- Float-oriented regimes: evidence supports that pure floats are associated with lower macroeconomic and financial vulnerabilities relative to less flexible regimes.
- Managed floats: policymakers using intermediate arrangements that effectively operate as managed floats may attain risk profiles closer to pure floats, reducing crisis propensity.
- Hard pegs: while potentially limiting banking and currency crises, hard pegs carry elevated risk of growth collapses—policy makers should weigh growth-stability trade-offs rather than presume hard pegs are categorically safer.
- Regime choice guidance: no simple, universally applicable dividing line separates safe floats from risky intermediate regimes; nuanced, context-specific assessment of regime implementation and accompanying policies is required.
Research and caveats
- The Working Paper describes research in progress and is published to elicit comments and further debate.
- Disclaimer: This Working Paper should not be reported as representing the views of the IMF. The views expressed are those of the author(s) and do not necessarily represent those of the IMF or IMF policy.
Source: Atish R. Ghosh; Jonathan David Ostry; Mahvash S Qureshi, "Exchange Rate Management and Crisis Susceptibility: A Reassessment", IMF Working Papers 2014, 011 (2014), January 24, 2014, DOI: https://doi.org/10.5089/9781484383971.001