A comparison of exchange rate regime choice in emerging markets with advanced and low income nations for 1999-2011

- Creates classification of exchange rate regimes for 137 nations
- Provides a comparative perspective across three different groups of nations
- Employs different econometric techniques
- Performs robustness checks with de facto measures of exchange rate flexibility
- Regime choice is consistently influenced by conventional economic determinants.

The recent global financial crisis has sparked a renewal of debate on the choice of exchange rate regimes. Creating a tripartite regime classification, the present study examines their determinants for 137 nations spanning the period 1999-2011. I find that trade openness, economic development, foreign-currency liabilities, and foreign exchange reserve holdings increase the likelihood of choosing a fixed-type regime in emerging markets while economic size, export concentration ratios and financial development lower such a chance. Capital controls, inflation differential with an anchor nation and land size significantly influence regime-choice in advanced and low income countries, but are largely insignificant in emerging markets.