Exchange rate regimes

• Expenditure-Switching Effect and the Choice of Exchange Rate Regime

  Staff Working Paper 2007-54 Wei Dong

  The author investigates the quantitative importance of the expenditure-switching effect by developing and estimating a structural sticky-price model nesting both producer currency pricing (PCP) and local currency pricing (LCP) settings.

  Content Type(s): Staff research, Staff working papers Topic(s): Exchange rate regimes, International topics JEL Code(s): F, F3, F4

• Exchange Rate Regimes, Globalisation, and the Cost of Capital in Emerging Markets

  Staff Working Paper 2007-29 Antonio Diez de los Rios

  This paper presents a multifactor asset pricing model for currency, bond, and stock returns for ten emerging markets to investigate the effect of the exchange rate regime on the cost of capital and the integration of emerging financial markets. Since there is evidence that a fixed exchange rate regime reduces the currency risk premia demanded by foreign investors, the tentative conclusion is that a fixed exchange rate regime system can help reduce the cost of capital in emerging markets.

  Content Type(s): Staff research, Staff working papers Topic(s): Development economics, Exchange rate regimes JEL Code(s): F, F3, F30, F33, G, G1, G15