Choosing (and Reneging on) Exchange Rate Regimes

We use data on announced and actual exchange rate arrangements to ask which countries follow de facto regimes different from their de iure ones, that is, do not do what they say. Our results suggest that countries with poor institutional quality have difficulty in maintaining pegging and abandon it often. In contrast, many countries with relatively good institutions display fear of floating, that is, they manage more than announced, perhaps to signal their differences from those countries incapable of maintaining promises of monetary stability. (JEL: F3, O1) Copyright (c) 2006 by the European Economic Association.