Menna Bizuneh from The College of St. Benedict and St. Johns University will be on campus Friday for the second Economics Colloquium of the year.
The talk, “Are We Floating Yet?” will be at 4:30 in Steitz 102.
Here are the particulars:
Are We Floating Yet?
The choice of exchange rate regimes and its impacts on economic performance is one of the most controversial topics in macroeconomic policy and has received considerable multifaceted attention as it has evolved in the past 100 years. There are some cornerstones of theories that have been put forth to explain the choice of exchange rate regime, where the tradeoff between credibility associated with fixed exchange rate regimes and flexibility associated with floating exchange rate regimes is usually guiding the choice of currency policy choice. However, the issue of exchange rate regime choice seems to be less obvious when we look at how countries actually choose exchange rate regimes. Even more ambiguous is the decision to switch from one exchange rate regime to another, as exemplified by “fear of floating”. In this paper we investigate the factors that may influence the probability of a switch from a fixed to a flexible exchange rate regime using survival models. In particular we are interested in the effect of time-dependence. To this effect, the use of survival models allows us to test if a switch to flexible exchange rate regime is dependent on the time spent on a fixed exchange rate regime. We find that exchange rate regimes, namely fixed exchange rate regimes, have non-monotonic influences on the probability of abandoning a peg in favor of a floating currency policy.