文献整理
Literature Review
属于 political economy studies: Collins (1996) and Edwards (1996) have highlighted the role of
political factors (political instability and government temptation to inflate) in influencing the choice
of exchange rate regime.
Political economy theories show that a country lacking political stability has an incentive ceteris
paribus to let its exchange rate float as it lacks the political ability and political support for the
unpopular measures that may be required to defend a peg. Also, under a floating regime, exchange
rate adjustments are less highly visible to the public and consequently less politically costly than a
devaluation under a peg (Collins, 1996). Finally, as argued in Edwards (1996), a government with
an “ambitious” unemployment objective has a high temptation to inflate, and thus ceteris paribus
a high incentive to “tie its own hands” by pegging the exchange rate.
支持“fear of floating” approach: Calvo and Reinhardt (1999, 2000), Hausman, Panizza, and Stein
(2000), and Levy Yeyati and Sturzenegger (1999), have argued that some countries which de jure
have switched to floating exchange rates are de facto still pegging, due to a high exchange rate risk
exposure (unhedged foreign currency liabilities). They focuses on the presence of currency
mismatches in balance sheets to explain why some countries which are de jure floating their
exchange rate are de facto pegging it to the currency in which their foreign currency liabilities
and/or assets are denominated.
According to the fear of floating approach, countries with high unhedged foreign currency
denominated debt and a correspondingly high exchange rate risk exposure have an incentive to
peg to the foreign currency in which they have borrowed even if they are officially floating (Calvo
and Reinhardt, 2000, Hausman, Panizza, and Stein, 2000). The inability to hedge in turn usually
reflects the inability of these countries to borrow abroad in their own currency and the reluctance
of nonresidents to take net long positions in their currencies.
找不到 full text Balino, Bennet, and Borensztein (1999) highlight dollarization (the widespread
holding of foreign currency dominated assets) as another factor increasing incentives to fix the
exchange rate. In fear of floating view, the apparent trend toward increased flexibility is to a certain
degree a fallacy.
On the asset side, the prevalence of currency substitution (the use of foreign currency
denominated assets for transactions) also tends to strengthen the case for fixing the exchange rate.
Such an arrangement protects the economy from the effects of potentially excessive exchange rate
and money market volatility (Balino, Bennet, and Borensztein, 1999 and Berg and borensztein,
2000)
去看 optimal choice of exchange regime!
More recently, a large theoretical literature has examined the optimal choice of exchange regime
so as to stabilize macroeconomic performance in a world with different types of shocks. The basic
conclusion of these studies is that the optimal choice of regime depends on the nature and size of
these shocks, as well as on the structure of the economy (e.g., see Flood, 1979, Frenkel and
Aizenman, 1982 and Tumovsky, 1983 and the survey by Aghevli et al., 1991). These analyses tend
to imply that countries which experience large foreign price shocks should choose flexible
exchange rates, while domestic monetary and demand shocks should be financed out of reserves,
with no need for exchange rate adjustment. However, it should be noted that these models are
somewhat sensitive to exactly what is specified as the policy maker's objective function: stabilizing
prices, output or aggregate consumption (see Melvin, 1985, for a discussion of this point). Some
of the models focus on the optimal degree of exchange market intervention, with less intervention
being associated with more flexible regimes. Not surprisingly, these studies tend to find that
intermediate options are preferable to purely fixed or flexible regimes.
A few papers have empirically examined the choice of exchange rate regime. These studies all use
the IMF classification of exchange regimes to create the dependent variable. More recent studies
have incorporated different types of shocks as well. Melvin (1985) and Cuddington and Otoo (1990,
1991) find some support for the view that the size of recent domestic and foreign shocks influences
a country's choice of exchange rate regime.
As noted by Quirk (1994), in his discussion of exchange rate regimes in developing countries, "Prior
to the 1980s, it was widely believed that operating a competitive floating exchange rate regime
required a level of institutional development these countries did not possess" (p. 135). Williamson
(1982) states that "There appears to be widespread agreement that independent floating is either
infeasible or undesirable for most developing countries, due to factors such as limited capital
markets, restrictions on capital flows, thin foreign exchange markets and a prevalence of real
shocks that should be financed from the reserves" (p. 39). Williamson goes on to examine how
countries should decide which currency to peg to, given that they would decide to peg.
Since the mid-1980s, however, this view appears to have all but disappeared. Quirk (1994)
observes that the IMF's 1987 review of the early experience with floating exchange regimes
concluded that these systems could be operated satisfac- torily, even by developing countries with
a wide range of structures. Many developing economies were encouraged to abandon fixed rates
during the 1980s.
Methodology
IMF:
Existing results are sensitive to omitted variables bias. The fear of floating studies do not control
for political factors and conversely, the political economy studies do not control for exchange rate
risk exposure and dollarization.
Fear of floating studies 只区分了 de facto and de jure floats, 没区分 hard peg (currency
union/boards) 和 standard peg.
The paper address these shortcomings by：(1) using better indicators of exchange regime choice
这个应该指分类 (2) controlling for the largest possible number of potential explanatory variables.
To avoid a potential omitted variables bias, both political economy and fear of floating variables
are included, together with more traditional structural criteria of exchange regime choice.
Alesina and Wagner (2006)
We therefore proceed by using the RR classification in our main analysis. Their basic procedure is
as follows: Starting from detailed country chronologies, they first ask whether there existed a
unified rate or dual/multiple/parallel market rates. In the first case, they next check whether, in
the case where there was an official announcement, the actual rate behavior passes a statistical
verification test. If not, or if there was no announcement, they statistically classify the regime and
give it the label “de facto.” The same happens in the case of multiple rates. If the announcement
is verified, the regime is labeled as “de iure.” We employ the LYS classification in our robustness
tests.
In Table 2, we match all the classifications. We need to use RR’s “coarse” classification in order to
be able to compare exchange rate regimes across different classifications10. RR point out that
separating “freely falling” countries with other floaters is important. This is cor- rect. However, for
the purposes of our main exercise - the investigation of the relation between political factors and
the propensity for countries to deviate from announcements -, this distinction is not crucial. Except
for the table 2, we therefore aggregate RR’s categories 4 and 5 into one category 4.
Measures of cheating. Our basic approach to quantifying the extent of “broken promises” is simple
but well-grounded in the comparability of the regime classifications. We take the difference
between RR (or any of the other de facto classifications) and the IMF classification. Table 3 shows
a cross tabulation of observations in the two classifications.
Table 2: De jure and de facto exchange rate regime classifications
IMF
Reinhart-Rogoff
LYS
Shambaugh
1
Pegged to: single
currency,
composite
of
currencies
No separate legal
tender UP TO de
facto peg
Fix
Zero percent change in
the
exchange
rate,
realignment, but zero
change in 11 of 12
months
2
Flexibility Limited
Pre
announced
crawling peg UP TO
de facto crawling
Dirty/Crawling peg
小步调整汇价的
钉住方法
Stays within 1% bands
band
that
is
narrower than or
equal to +/- 2%
3
Managed
Floating
De facto crawling
band
that
is
narrower than or
equal to +/- 5% UP
TO
Managed
floating
Dirty
Stays within 2% bands
4
Independent
floating
Freely floating or
freely falling
Float
No peg
Calvo and Reinhart (2002), for example, define fear of floating as de iure floaters who do something
to smooth the fluctuations of the nominal rate. Levy-Yeyati, Sturzenegger and Reggio (2002) define
fear of pegging as having a de facto peg but claiming another regime. Thus, they really talk about
fear of announcing a peg. In other words, the two terms, even though they sound similar, take
different viewpoints.
Our main interest in this paper is in situations where actions do not correspond with (previous)
announcements. The following figure therefore highlights those observations which we will
subsume under the terms “fear of floating” and “fear of pegging.”
Dependent Variable:
(1) FEAROFFLOAT (dummy), = 1 whenever the observation is in the lower right triangle of the
graph (i.e. when RR minus IMF is negative) ; otherwise it is 0.
(2) FEAROFPEG, = 1 whenever we observe a country-year in the top left corner of the graph (i.e.
when RR minus IMF is positive); otherwise it is 0.
先研究实际汇率：Table 5 displays some logit regressions where the dependent variable captures
whther the country in question, in a certain year adopts a fixed rate regime or not according to the
Reinhart-Rogoff classification. So a country is classified as 1 for having a fixed exchange rate regime
regardless of whether it says so and actually maintains its announcements or says otherwise but
in practice adopts a fixed rate system
再研究 main question: We now move to the main focus of our analysis, namely an empirical
analysis of why countries do not always do what they say they do.
Table 7 displays several logit regressions concerning the inability to keep a peg. Recall that for
brevity and with an analogy with the notion of “fear of floating,” we label this behavior “fear of
pegging,” a term that is a bit misleading, since it reflects more than a “fear:” it also reflects
an ”inability”. Still, the analogy is too tempting and we use it.
As described in the data section, on the left hand side we have country years in which the country
announces a regime that is more fixed than what is observed in practice. More precisely, we take
the difference between the RR de facto classification and the IMF de iure classification and set the
dependent variable equal to 1 whenever RR minus IMF is greater than 0. In table 7 we present four
“representative” regressions, which all include year dummies, starting from a minimalist one and
using two measures of institutional quality, the composite index and a measure of protection of
property rights.
Table 9 presents results for the fear of floating country-years. Here,
the dependent variable is equal to 1 if the difference between the RR classification and the IMF
classification is smaller than 0, to capture countries that float less than announced. The regressions
are organized in the same way as in Table 7, and also include year dummies.
Carmignani, Colombo (2008)
Our work provides several contributions to the existing literature. First, we go beyond the standard
de jure and de facto dichotomy and analyse a taxonomy of regimes (de jure-non-de facto pegs, de
facto- non-de jure pegs, de facto-de jure pegs, fear of floating, etc.). This allows us to identify the
determinants of specific regime choices and the value of breaking certain ‘‘promises’’. Second, the
focus on the credibility-vs-consistency dilemma leads us to study three channels that link politics
to the choice of the exchange rate regime: (i) the electoral cycle, (ii) government termination and
socio-political unrest, (iii) institutional arrangements concerning the decision-making process.
Other contributions focused on broad dimensions such as the level of democracy (Leblang, 1999),
the transparency of the political process (Broz, 2002), the quality of institutions and governance
indicators (Alesina and Wagner, 2006). We analyse factors which are more closely related to the
macroeconomic policy stance and to the choice of the exchange rate regime. To our knowledge,
ours is the first systematic and comprehensive assessment of the role played by political variables
in exchange rate regime choice.3 Third we extend our analysis on the credibility-vs-consistency
dilemma by performing a duration analysis on the survival of de facto pegs. Fourth, we generalise,
integrate and expand existing results by estimating a rich model specification on a large (96
countries) data set of developing and advanced economies spanning from 1974 to 2000.
For our purposes empirical research provides only preliminary evidence: Alesina and Wagner
(2006), Levy-Yeyati et al. (2004) and Poirson (2001) find that liability dollarization is associated with
de facto pegs, but do not investigate whether liability dollarization affects the probability that de
facto pegs are also announced.
Two alternative classifications for de facto regimes are available. Levy-Yeyati and Sturzenegger
(2002) adopt a statistical approach based on cluster analysis of the volatility of exchange rate and
reserves. Reinhart and Rogoff (2004) use a ‘‘natural’’ classification inferring the de facto regime
from parallel market exchange rates. In this paper, we follow the latter classification, mainly
because it avoids the use of unreliable data on international reserves. For completeness we test
the sensitivity of our results against the Levi-Yeyati and Sturzenegger’s classification.
The choice of the estimation method requires some discussion. Applying panel data estimators
would be problematic. A random effect estimator is not appropriate because we are investigating
a large number of countries and the sample cannot be considered as drawn from a large
distribution. A fixed effect estimator would be of little use in estimating variables that display
limited variability over time, such as political and institutional variables. As we focus on several of
these variables, we opt for the pooled OLS estimator (The same approach is adopted by most of
the literature). In doing so, we implicitly assume that all the individual heterogeneity is captured
by our political variables. In order to control for possible endogeneity, we lagged the variables,
when needed (see the Appendix).
Variables:
首先是直接跟 credibility 和 consistency view 相关的：
(i) Liability dollarization: we proxy it with the ratio of foreign liabilities over money (forliab).
(ii)
Inflation:weconsiderthelaggedrateofinflationmeasuredasathreeyearmovingaverage(avinfl).
We also control for high inflation countries with a dummy (dinfl) taking value 1 when the annual
rate of inflation is above 40%.10
(iii) Electoralcycle:thedummyvariablelegelectakesvalue1inelectoralyearsandzerootherwise.The
dummy is coded considering legislative elections. However, re-coding it to include also executive
elections does not produce any change in the results.
(iv) Government turnover and socio-political instability: we use two indicators. The first one is
the incumbent’s tenure in office (yearsoffc). As discussed in the literature, longer tenure in office
is associated with a higher probability of observing a government change in the near future
(Carmignani, 2002). Thus, higher values of yearsoffc denote higher expected government turnover.11 The second indicator is an aggregate index of socio-political instability, (sociopolrisk). This
is obtained as the principal component of several indicators of social instability (see the Appendix
for details).
(v) Constitutional arrangements: the variable polrisk measures the checks and balances
incorporated in the institutional system. Higher values correspond to a situation where reversing
policy changes are more difficult because the executive has looser control over the decisionmaking pro- cess. Technically, the index is obtained as the principal component of three measures
quantifying the number of veto players and hurdles in decision rules (see the Appendix for more
details). Persson and Tabellini (2004) point out that constitutional rules contribute to shaping
political bargaining and hence economic policy outcomes. We capture these effects through a
second institutional variable, system, which isolates three main typologies of political regimes:
presidential, assembly-elected and parliamentary. In our interpretation, higher values of system
correspond to more fragmented political processes.
不跟 credibility-vs-consistency dilemma 相关的 Other controls:
1. Openness, size: OCA theories predict that the more open the economy, the greater the
trade- enhancing effect of fixed exchange rates. It then follows a positive association between
openness to in- ternational trade and the propensity to peg. Yet, more open economies are
more exposed to external shocks, and therefore benefit from exchange rate flexibility.
Moreover, the economic size of a country should negatively affect the likelihood of pegging as
larger economies are generally more closed. Finally, fear of floating theories (Calvo and
Reinhart, 2002) stress that exchange rate flexibility exposes more open economies to relative
price volatility (depending on the degree of pass through). We measure trade openness as the
sum of imports and exports over GDP (open). Economic size is defined as the ratio between
the country GDP to US GDP (sizetous).
2. Trade concentration and economic volatility: trade concentration exposes countries to
external shocks and should therefore reduce the likelihood of observing a peg. Moreover, one
would expect indicators of economic volatility to be negatively related with the propensity to
peg, because flexible exchange rates can be used to stabilise the economy. Trade concentration
is measured as the share of export to the three largest partners (sharetrade). We use two
measures of economic volatility: volatility of investment over GDP (volinv), and volatility of
government expenditure over GDP (volgovexp). Both measures proxy volatility by the standard
deviation of the two variables.12
3. Financial development: financially developed economies are less likely to peg (Obstfeld and
Taylor, 2004). Fear of floating theories claim that more developed economies show greater
ability to float (Calvo and Reinhart, 2002).13 Following the correlation between financial and
economic develop- ment, financial depth should reduce the propensity to peg. A related
argument is that capital account openness should be associated with a float, as high capital
mobility makes it more difficult to main- tain a peg. We proxy financial development with the
ratio of quasi money over money (findepth). As for capital account openness (kaopen), we
employ two indicators: the first is an updated measure of Chinn and Ito (2002); the second is
a dummy taking value of 1 if capital account restrictions are present.
4. Ideological preferences: the partisan business cycle literature14 claims that right-wing
governments should be more conservative in the use of macroeconomic policy as a
coutercyclical tool. In this respect, ideology could affect the degree of discretion that
governments are willing to retain over macroeco- nomic policy and hence the choice of the
exchange rate regime. We therefore include the policymaker’s ideological preferences as an
additional control. The dummy variable d_right takes value 1 when the incumbent has a rightwing ideological orientation and zero otherwise.
IMF (2002)
回归结果：Regression results for 93 developing countries over 1990-98 show that countries’
exchange regime decisions reflect primarily their size (GDP), vulnerability to external shocks,
inflation, product diversification, capital mobility, level of reserves, political instability, and
temptation to inflation faced by the government, i.e. both certain traditional optimal currency area
criteria and the recently highlighted political factors. Our results also confirm the fear of floating
view, showing that dollarization (currency substitution) and the degree of exchange rate risk
exposure (measured by the ability to hedge) are significant factors explaining cross-country
differences in exchange rate regime choice. Both increase the likelihood of fixing the exchange rate.
In contrast, we find no significant role for traditional optimal currency area criteria such as trade
openness, dominant trading partner, and economic development level.
Based on these findings, the trend toward increased flexibility observed in recent years can be
expected to continue, both de jure and de facto, as more countries become financially integrated,
macroeconomically stable (lower temptation to inflate), and gain the ability to hedge their
exchange rate risk exposure.