Exchange Rate Regimes and Economic Performance

IMF Staff Papers, Vol. 47, pp. 62-98, 2001

Posted: 16 Jun 2004

See all articles by Eduardo Levy Levy-Yeyati

Eduardo Levy Levy-Yeyati

Universidad Torcuato Di Tella - School of Business

Federico Sturzenegger

Universidad Torcuato Di Tella; Harvard University - Harvard Kennedy School (HKS); National Bureau of Economic Research (NBER)

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Abstract

This paper studies the impact of exchange rate regimes on inflation, nominal money growth, real interes rates, and GDP growth. We find that, for nonindustrial economies, long pegs (lasting five or more years) are associated with lower inflation than floats, but at the cost of slower growth. A similar trade-off between inflation and groth is still present in the case of hard pegs (currency boards and economies without separate legal tender), whose growth performance does not differ significantly from that of conventional pegs. In contrast, short pegs clearly underperform floats, as they grow slower without providing any gains in terms of inflation.

JEL Classification: E31, E52, F41, F43

Suggested Citation

Levy-Yeyati, Eduardo Levy and Sturzenegger, Federico, Exchange Rate Regimes and Economic Performance. IMF Staff Papers, Vol. 47, pp. 62-98, 2001, Available at SSRN: https://ssrn.com/abstract=539822

Eduardo Levy Levy-Yeyati (Contact Author)

Universidad Torcuato Di Tella - School of Business ( email )

Saenz Valiente 1010
C1428BIJ Buenos Aires
Argentina

Federico Sturzenegger

Universidad Torcuato Di Tella ( email )

Minones 2159
1428 Buenos Aires, 1428
Argentina

Harvard University - Harvard Kennedy School (HKS) ( email )

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Cambridge, MA 02138
United States
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617-496-1722 (Fax)

National Bureau of Economic Research (NBER)

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