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Exchange Rate Regimes in the Modern Era$
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Michael W. Klein and Jay C. Shambaugh

Print publication date: 2009

Print ISBN-13: 9780262013659

Published to MIT Press Scholarship Online: August 2013

DOI: 10.7551/mitpress/9780262013659.001.0001

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Exchange Rate Regimes and Bilateral Exchange Rates

Exchange Rate Regimes and Bilateral Exchange Rates

(p.100) (p.101) 6 Exchange Rate Regimes and Bilateral Exchange Rates
Exchange Rate Regimes in the Modern Era

Michael W. Klein

Jay C. Shambaugh

The MIT Press

This chapter examines and provides a distinction between the behaviors of fixed exchange rate regimes and floating exchange rate regimes. First it separates the indisputable and disputable floats through the work of Calvo and Reinhart. Next, the chapter explores and measures volatility between float observations and peg observations using the Klein-Shambaugh classification system to classify each one. Pegging is thus seen to have persistent outcomes and changes in volatility. Pegs are concluded to be fragile, yet are good predictors of low volatility. Typical floating observations, on the other hand, are seen to have more volatility even when placed under certain controls. It is suggested, therefore, that pegs can be expected to have real effect on economic outcomes.

Keywords:   fixed exchange rate, floating exchange rate, Calvo, Reinhart, float observations, peg observations, Klein-Shambaugh

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