Long-Run Determinants of Exchange Rate Regimes: A Sample

Sensitivity Analysis

Stanley Fischer

Class: International Finance & Open Macroeconomy

Dr. Nayef N. Al-shammari

Date 14th May, 2012

Presented by

Mahdi Akbar

Result

• Based on IMF end-2000 classification of regimes.

• We find several instances in which the means of possible determinants are significantly different across group of countries at 5 % level significant

• Large countries, countries with low share of trade, countries with high inflation, politically stable countries, transition countries are all more likely to float than to have hard pegs or intermediate regimes.

• Countries with low capital controls are more likely to have hard pegs than intermediate or floating regimes.

• However, most of these relation are no longer significant when controlling for other variables in context of regression analysis

Result

Result• Table 3 show the correlation matrix for the potential

determinants of exchange rate regimes.

• There are many potential determinant are correlated with each other

• However, there don’t seem to be obvious signs that multicollinearity underlies the absence of significant and robust results

Questions