Domac, IlkerPeters, KyleYuzefovich, Yevgeny2014-08-212014-08-212001-07https://hdl.handle.net/10986/19572To examine whether a country's exchange rate regime has any impact on inflation and growth performance in transition economies, the authors develop an empirical framework that addresses some of the main problems plaguing empirical work in this strand of the literature: the Lucas critique, the endogeneity of the exchange rate regime, and the sample selection problem. Empirical results demonstrate that the exchange rate regime does affect inflation performance. the results suggest that: 1) Transition countries with intermediate arrangements might reduce inflation if they were to adopt a fixed regime. 2) Switching from a floating regime to an intermediate regime might not reduce inflation. 3) An unanticipated float--when a country whose fundamentals make it unlikely to adopt another regime adopts a floating regime--results in lower inflation. Based on their results, it is not possible to infer more about one particular exchange rate regime being superior to another in terms of growth performance. But empirical findings do underscore the different effects that policy variables--and other variables influencing economic activity--have on growth under different exchange-rate arrangements.en-USCC BY 3.0 IGOADVERSE EFFECTSAGGREGATE DEMANDBALANCE OF PAYMENTSBALANCE OF PAYMENTS STATISTICSBANKING CRISESBASKET OF CURRENCIESBUDGET DEFICITBUDGET DEFICITSCAPITAL ACCOUNTCAPITAL FLOWSCAPITAL INFLOWSCAPITAL MARKETSCAPITAL MOBILITYCENTRAL BANKCENTRAL PLANNINGCOUNTRIESCOUNTRY SPECIFICCRISIS EPISODESCURRENCYCURRENCY BOARDCURRENCY BOARDSCURRENCY PEGSCURRENT ACCOUNTCURRENT ACCOUNT DEFICITDEREGULATIONDEVELOPED COUNTRIESDEVELOPING COUNTRIESDEVELOPING WORLDDOMESTIC ECONOMYECONOMIC ACTIVITYECONOMIC LITERATUREECONOMIC OBJECTIVESECONOMIC STUDIESECONOMICSEMERGING ECONOMIESEMERGING MARKETSEMPIRICAL EVIDENCEEMPIRICAL LITERATUREEMPIRICAL RESULTSEMPIRICAL STUDIESEMPIRICAL WORKERROR TERMEUROEXCESS DEMANDEXCHANGE RATEEXCHANGE RATE ARRANGEMENTSEXCHANGE RATE CHANGESEXCHANGE RATE FLEXIBILITYEXCHANGE RATE POLICIESEXCHANGE RATE POLICYEXCHANGE RATE REGIMEEXCHANGE RATE REGIMESEXCHANGE RATESEXPORTSFINANCIAL DEPTHFINANCIAL ENVIRONMENTFINANCIAL INSTITUTIONSFINANCIAL MARKETSFINANCIAL POLICIESFISCAL DEFICITFIXED EXCHANGE RATEFIXED EXCHANGE RATESFLEXIBLE EXCHANGE RATESFLOATING EXCHANGE RATEFLOATING EXCHANGE RATESFLOATING RATESFOREIGN EXCHANGEFOREIGN EXCHANGE MARKETFOREIGN SHOCKSGDPGOVERNMENT EXPENDITURESGROWTH EQUATIONGROWTH PERFORMANCEINCOMEINDEXATIONINFLATIONINFLATION PERFORMANCEINFLATION RATEINFLATION RATESINTEREST RATESINTERMEDIATE REGIMESINTERNATIONAL MARKETSINTERNATIONAL TRADEINTERNATIONAL TRANSACTIONSMACROECONOMIC CONDITIONSMACROECONOMIC IMPLICATIONSMACROECONOMIC OUTCOMESMACROECONOMIC PERFORMANCEMACROECONOMIC POLICIESMACROECONOMIC STABILIZATIONMACROECONOMIC VARIABLESMONETARY POLICYMONEY CREATIONMONEY DEMANDMONEY SUPPLYNOMINAL ANCHORNOMINAL EXCHANGE RATENOMINAL EXCHANGE RATESOPEN ECONOMIESOUTPUT GROWTHOUTPUT VOLATILITYPOLICY MAKERSPOLICY RESEARCHPOLICY VARIABLESPOVERTY REDUCTIONPRICE CONTROLSPRIVATE SECTORREAL EXCHANGEREAL EXCHANGE RATEREAL EXCHANGE RATE VOLATILITYREAL OUTPUTREAL TERMSRESERVESSDR PEGSSEIGNIORAGESIGNIFICANT IMPACTSOFT PEGSSTABILIZATION PROGRAMSTELECOMMUNICATIONSTERMS OF TRADETRANSITIONTRANSITION COUNTRIESTRANSITION ECONOMIESTRANSITION PROCESSVULNERABILITY10.1596/1813-9450-2642