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Are We Floating Yet? Duration of Fixed Exchange Rate Regimes

Location: Click here for the Zoom link

Time: Thu Apr 15 2021, 11:00am EDT

Presenters: Menna Bizuneh, PhD

Abstract  

This paper studies the determinants of choice of exchange rate regime. In particular the factors that may influence the probability of a switch from a fixed to a flexible exchange rate regime are examined. Using survival analysis, which incorporates recurrent events, allows us to test both for duration dependence and occurrence dependence effects of time and previous peg switch events on regime durability.  Furthermore, “variance corrected” marginal risk analysis is utilized to account for possible country intra-correlation, which occurs when exit times are correlated within a cluster in a multiple exit-time data. Using the de facto exchange rate regime data the results show that fixed exchange rate currency policies have non-monotonic duration dependence. These results are robust even when intra-country correlation is accounted for.