Fear of floating in Asia and the credibility of true floaters? |
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| Institution: | 1. Department of Finance, Lahore School of Economics, Lahore, Pakistan;2. Suleman Dawood School of Business, Lahore University of Management Sciences, Lahore, Pakistan;3. SP Jain School of Global Management, Dubai, UAE;4. Department of Finance, University of Paris 1 (Panthéon Sorbonne), Paris, France;1. Department of Economics, Faculty of Economics & Administration, University of Malaya, 50603 Kuala Lumpur, Malaysia;2. Labuan Faculty of International Finance, Universiti Malaysia Sabah, Malaysia;3. Finance Section, School of Management, Universiti Sains Malaysia, Malaysia;1. Administration Program, Pontifical Catholic University of Parana, 1155, Imaculada Conceição St., Curitiba, PR, 80215-901, Brazil;2. Desautels Faculty of Management, McGill University, 1001 Sherbrooke St. W, Montreal, QC, H3A 1G5, Canada;1. Faculty of Business, Multimedia University, Melaka, Malaysia, Malaysia;2. Faculty of Management, Multimedia University, Cyberjaya, Malaysia, Malaysia;1. Swansea University, United Kingdom;2. University of Manchester, United Kingdom |
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| Abstract: | Quite often, countries commit to free floating exchange rate (ER) regimes but do not allow their ERs to float freely, exhibiting a fear of floating. We revisit ER regimes in Asia following the work of Calvo and Reinhart (2002), and also develop a new flexibility index based on probabilities gauging interventions in FX market. In light of our findings, we cannot disregard the existence of fear of floating in Asia, and find that economies widely known as truly floating economies exhibit this fear too. Further, the results validate our concerns regarding the IMF’s methodology of regime classification intermingling credible inflation targeting with fear of floating. |
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| Keywords: | Exchange rate regime Flexibility Fear of floating Asia Pegging |
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