Working Paper: CEPR ID: DP7006
Authors: Jürgen von Hagen; Jizhong Zhou
Abstract: We present an analysis of the determinants of de jure and de facto exchange rate regimes based on a panel probit model with simultaneous equations. The model is estimated using simulation-based maximum likelihood methods. The empirical results suggest a triangular structure of the model such that the choice of de facto regimes depends on the choice of de jure regimes but not vice versa. This gives rise to a novel interpretation of regime discrepancies.
Keywords: De facto exchange rate regimes; Developing countries; Simultaneous equations
JEL Codes: C35; F33; F41
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| de jure regimes (P37) | de facto regimes (O17) |
| desirability of exchange rate flexibility (F31) | de facto regimes (O17) |
| desirability of exchange rate flexibility (F31) | de jure regimes (P37) |
| political strength of governments (H11) | de facto regimes (O17) |
| political strength of governments (H11) | de jure regimes (P37) |