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The duration of fixed exchange rate regimes

Sébastien Wälti

This paper studies the survival of fixed exchange rate regimes. The probability of an exit from a fixed exchange rate regime depends on the time spent within this regime. In such a context durations models are appropriate, in particular because of the possible non-monotonic pattern of duration dependence. Non-parametric estimates show that the pattern of duration dependence exhibits non-monotonic behaviour and that it differs across types of economies. This behaviour persists when we control for time-varying covariates in a proportional hazard specification. We conclude that how long a regime has lasted will affect the probability that it will end, in a non-monotonic fashion.

Keywords: Exchange rate regime, currency crisis, regime transition, duration
models, survival analysis.
JEL Classification: F30, F31, F41.


Last updated 28 August 2014 by IIIS (Email).