CFCM 19/03: Exchange rate flexibility: How should we measure it?

Summary

This paper examines the extent of agreement between some recent exchange rate classification schemes, and also assesses the merits of some continuous measures of exchange rate flexibility. There is a probability of between 18 and 28 percent that a peg in one classification scheme is coded as a float in a different scheme, or vice versa. This probability is much smaller for the tightest forms of peg and the most volatile floats. An appropriately selected numerical index of exchange rate flexibility is potentially very useful.

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A revised version has been published in Open Economies Review, Vol. 31, no. 4 (September 2020), pp. 881-900.

Authors

Michael Bleaney and Mo Tian

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