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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 Multilateral Exchange Rates

Exchange Rate Regimes and Multilateral Exchange Rates

(p.117) 7 Exchange Rate Regimes and Multilateral Exchange Rates
Exchange Rate Regimes in the Modern Era

Michael W. Klein

Jay C. Shambaugh

The MIT Press

This chapter demonstrates how the overall exchange rate index is considerably affected by exchange rate regimes. It first discusses multilateral volatility and the literature in relation to the topic, such as those authored by Canales-Kriljenko and Habermeier, whose work expounded on the lower nominal multilateral exchange rate volatility of pegs in comparison to floats. Empirical evidence of this multilateral volatility is provided through the observations and indexes of the IMF’s International Financial Statistics. In these reports, 50 percent of the lowest multilateral volatility quintile is composed of pegs. In conclusion, exchange rates that are fixed against one currency provide merely a limited view of the economic effects of pegging. Instead, multilateral exchange rate is seen as that which economic outcomes are more dependent upon, and overall, exchange rate regimes are concluded to have definite impacts on the exchange rate.

Keywords:   exchange rate index, multilateral volatility, Canales-Kriljenko, Habermeier, International Financial Statistics, multilateral exchange rate, nominal multilateral exchange rate

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