Persistence, Capital Account Openness, and Financial Sector Health in Exchange Rate Regime Choice

21 Pages Posted: 9 Sep 2015

See all articles by Mohammad Tarequl Hasan Chowdhury

Mohammad Tarequl Hasan Chowdhury

Deakin University - Alfred Deakin Research Institute

Prasad S. Bhattacharya

Deakin University - Department of Economics; Research Associate, Centre for Applied Macroeconomic Analysis

Debdulal Mallick

Deakin University - Faculty of Business and Law

Mehmet Ali Ulubasoglu

Deakin University - School of Accounting, Economics and Finance

Date Written: September 2015

Abstract

This paper investigates empirically the persistence in exchange rate regimes as well as the role of capital account openness and financial sector health (measured by financial development and financial sector fragility) in exchange rate regime determination for a panel of 143 countries covering the post‐Bretton Woods period. The results demonstrate that while low‐ and high‐income countries exhibit highly persistent exchange rate regimes, middle‐income countries display relatively lower persistence. For middle‐income countries, capital account openness and the level of financial development play important roles in exchange rate regime choice. The fragility of the financial sector does not affect the exchange rate regime determination.

Suggested Citation

Chowdhury, Mohammad Tarequl Hasan and Bhattacharya, Prasad S. and Mallick, Debdulal and Ulubasoglu, Mehmet Ali, Persistence, Capital Account Openness, and Financial Sector Health in Exchange Rate Regime Choice (September 2015). Economic Record, Vol. 91, Issue 294, pp. 279-299, 2015, Available at SSRN: https://ssrn.com/abstract=2657833 or http://dx.doi.org/10.1111/1475-4932.12204

Mohammad Tarequl Hasan Chowdhury (Contact Author)

Deakin University - Alfred Deakin Research Institute

Burwood, VIC 3125
Australia

Prasad S. Bhattacharya

Deakin University - Department of Economics ( email )

221 Burwood Highway
Burwood
Melbourne, Victoria 3125
Australia
61392446645 (Phone)
61392446283 (Fax)

HOME PAGE: http://www.deakin.edu.au/~prasbhat

Research Associate, Centre for Applied Macroeconomic Analysis ( email )

ANU College of Business and Economics
Canberra, Australian Capital Territory 0200
Australia

Debdulal Mallick

Deakin University - Faculty of Business and Law ( email )

Burwood, Victoria 3215
Australia

Mehmet Ali Ulubasoglu

Deakin University - School of Accounting, Economics and Finance ( email )

Burwood, Victoria 3215
Australia
+61 3 9244 6592 (Phone)

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