Exchange-rate regimes and output volatility: empirical investigation with panel data

The study aims to explore the relationship between exchange-rate regimes and output volatility, building on the flaws of the existing, though scarce literature. It discusses the measure of output volatility; explores the endogeneity bias doubted to be present in the literature; tests non-dynamic vs. dynamic model. The empirical investigation covers the post-Bretton-Woods era (1976--2006) and includes 169 countries. It is found that sufficiently large terms-of-trade shocks will spur output volatility under fixed, limited-flexible and flexible exchange-rate regime as compared with a floating regime, but the marginal effect is estimated to be the most severe under a peg (longer than five years).