A comparison of exchange rate regime choice in emerging markets with advanced and low income nations for 1999–2011 Amit Ghosh ⁎ Department of Economics, Illinois Wesleyan University, 1312 Park Street, PO Box 2900, Bloomington, IL 61702-2900, USA article info abstract Article history: Received 6 August 2013 Received in revised form 15 February 2014 Accepted 17 February 2014 Available online xxxx The recent global financial crisis has sparked a renewal of debate on the choice of exchange rate regimes. Creating a tripartite regime classification, the present study examines their determinants for 137 nations spanning the period 1999–2011. I find that trade openness, economic development, foreign-currency liabilities, and foreign exchange reserve holdings increase the likelihood of choosing a fixed-type regime in emerging markets while economic size, export concentration ratios and financial development lower such a chance. Capital controls, inflation differential with an anchor nation and land size significantly influence regime-choice in advanced and low income countries, but are largely insignificant in emerging markets. © 2014 Elsevier Inc. All rights reserved. JEL classification: C250 F33 F41 Keywords: Advanced economies Emerging markets Exchange rate regimes Regime-flexibility Low income countries 1. Introduction One of the most debated and controversial topics in international finance is the choice of exchange rate regimes. The issue has been a core component of the discipline for as long as the subject exists. Regime choice has a profound influence on the efficacy of key economic policy objectives like financial stability, economic growth, low inflation, sustainable trade balance and international capital flows (see Chen, Kim, & Thompson, 2013; Giannellis & Koukouritakis, 2013; Kim & Hammoudeh, 2013; Kodongo & Ojah, 2012; Verheyen, 2012). The recent global financial crisis (henceforth GFC) has sparked a renewal of debate on the choice exchange rate regimes (Aizenman & Hutchison, 2011). The debt crisis in Europe has shown the constraints of policymaking in common currency areas while the financial meltdown in the US has exposed the fragility of the greenbacks as the world's leading anchor currency. As the process of restructuring the international financial architecture gains momentum, nations need to reconsider key policy issues like the extent of financial account liberalization, banking sector regulations, and for some, choice of regimes itself. The latter requires an understanding of its underlying economic determinants. The present study provides this. The analysis contributes to the literature in several aspects. I first provide a tripartite regime classification for 137 nations spanning the period 1999–2011. This time period coincides with the introduction of the euro while several other nations changed their exchange rate regimes in the aftermath of the currency crises of the 1990s. Secondly, regimes are identified according to economic development as the influence of the underlying macroeconomic factors on regime-choice could differ across income International Review of Economics and Finance xxx (2014) xxx–xxx ⁎ Corresponding author. Tel.: +1 309 556 3191. E-mail address: aghosh@iwu.edu. REVECO-00913; No of Pages 13 http://dx.doi.org/10.1016/j.iref.2014.02.008 1059-0560/© 2014 Elsevier Inc. All rights reserved. Contents lists available at ScienceDirect International Review of Economics and Finance journal homepage: www.elsevier.com/locate/iref Please cite this article as: Ghosh, A., A comparison of exchange rate regime choice in emerging markets with advanced and low income nations for ..., International Review of Economics and Finance (2014), http://dx.doi.org/10.1016/j.iref.2014.02.008