Exchange Rate Regimes: Choices and Consequences in a Global Economy

Background:
This project comprises four main questions. First we study the interaction between currency stability and sovereign risk. When do countries' exchange rate policies have an impact on the ability to repay foreign debt? We first assess the relationship between these types of risk through an event study, and then compare the estimated relationships across a large number of countries and colonies between 1870 and 1913.

In a related project, we examine the link between the exchange rate regime, external debt and financial crises during the late nineteenth century. We examine whether foreign currency debt for countries in the face of global capital flows made them more likely to face a crisis. Our initial results suggests institutions and other fundamental factors that matter most.

Two other projects look at exchange rate regime choice and regime collapse between 1950 and the present. We investigate the choice of anchor currency choice and propose to explain why so few currencies are used as anchors. We appeal to theories of fixed versus floating rates but also find that optimal currency area criteria matter. Importantly network externalities are present. Finally we investigate the duration of pegged exchange rate regimes.





Working Papers :

WEF0010
Currency Mismatches, Default Risk, and Exchnage Rate Depreciation: Evidence from the End of Bimetallism
Michael Bordo, Christopher Meissner, Marc Weidenmier
May 2006

WEF0009
Why Do Countries Peg the Way They Peg? The Determinants of Anchor Currency Choice
Christopher Meissner, Nienke Oomes
March 2006

WEF0002
Financial Crises, 1880-1913: The Role of Foreign Currency Debt

Michael Bordo, Christopher Meissner
March 2006

WEF0001
The Role Of Foreign Currency Debt in
Financial Crises: 1880-1913 vs. 1972-1997
NBER Working Paper No. 11173
March 2006


Journals, seminar papers and other publications:

Meissner, C. “Financial Crises, 1880-1913: The Role of Foreign Currency Debt” with Michael D. Bordo (forthcoming) in Sebastian Edwards ed. Growth, Institutions and Crises: Latin America from a Historical Perspective Chicago: University of Chicago Press and NBER.

Meissner, C. “Financial Crises and Foreign Currency Debt: 1880-1913 vs. 1972-1997” with Michael D. Bordo (2006) Journal of Banking and Finance. December. vol. 60 pp. 3299-3329.

Meissner, C., “Why do Countries Peg the Way they Peg? The Determinants of Anchor Currency Choice” with Nienke Oomes Cambridge Working Papers in Economics no. 0643

Taylor, A. D. (2007), “Firm heterogeneity and capital account liberalization”

Meissner, C., “Losing our Marbles in the New Century? The Great Rebalancing in Historical Perspective” with Alan M. Taylor (forthcoming) conference volume from the Federal Reserve Bank of Boston conference on Global Imbalances held in Chatham, Mass. June 2006. (also NBER working paper 12580, CEPR discussion paper 5917)

Meissner, Christopher, 2005, "The Role of Foreign Currency Debt in Financial Crises: 1880-1913 vs. 1972-1997," NBER working paper 11897 (forthcoming in the Journal of Banking and Finance)

Meissner, Christopher, 2005, "Financial Crises, 1880-1913: The Role of Foreign Currency Debt," National Bureau of Economic Research working paper 11173 (forthcoming in Growth, Protection and Crises: Latin America from an Historical Perspective, Sebastian Edwards, Gerardo Esquivel, and Graciela Marquez (eds.), NBER: Cambridge MA)


Researchers:
Dr Christopher Meissner
University of Cambridge

Contact:
Dr Christopher Meissner
Faculty of Economics and Politics
University of Cambridge
Austin Robinson Building
Sidgwick Avenue
Cambridge
CB3 9DD

Tel: 01223 335235
email:


Duration of Research:
October 2004 - September 2006