Exchange-rate regimes and economic growth: an empirical evaluation

Based on a data set of 123 economies, this article empirically investigates the relation between exchange-rate regimes and economic growth. We find that growth performance is best under intermediate exchange-rate regimes, while the smallest growth rates are associated with flexible exchange rates. Nevertheless, this conclusion is tempered when we analyse the countries by income level: even though countries that adopt intermediate exchange-rate regimes are characterized by higher economic growth, the higher the level of income, less difference in growth performance across exchange-rate regimes.