Optimal Exchange Rate Regime and Economic Growth: Case of Emerging Country

Abstract

This study aims to identify the optimal exchange rate regime that ensures the highest growth for emerging country. Based on a sample of 24 emerging country over the period 1974-2008, our results show that during the first 1974-1984 decade, the fixed regime offers the best growth compared to the flexible and intermediate regimes with a 3.5% rate. From 1985 to 2008, the two-polar-regimes offer approximately the same level of growth with a slight preference for the flexible regime. However, the intermediate regime has the highest average growth rate (2.79%). Moreover, our model reveals that the intermediate regime provides the emerging country with the highest growth rates.