Abstract

The aim of this thesis is to determine the conditions under which exits from fixed to flexible regimes are managed in an orderly fashion. Orderly exits have been identified on the basis of two criteria, exchange rate and output gape change. Sample covers post-Bretton Woods era. Methodology consists of parametric regression and non-parametric CART analysis. Sample selection bias is dealt by employing Heckman selection models, and comparison of different techniques reveals that results can be improved by employing CART results within regression analysis. The results suggest that overvaluation of RER, bigger output gap and private credit above trend, facing speculative pressure and negative external shocks during pre-exit period make exiting more painful. Having healthy banking sector eases the exit process. By and large, disorderly exits are found to be occurred in the midst of a boom-bust cycle whose seeds have been sowed by inadequately managed financial liberalization and macroeconomic stabilization programs

Details