Currency regimes and external competitiveness: the role of institutions, trade agreements and monetary frameworks

Abstract The literature lacks consensus on the role of currency regimes in explaining external competitiveness. Countries not only differ terms regimes, but can also have different institutional arrangements, namely trade agreements and inflation targeting (IT) frameworks addition to overall quality governance. Hence, using real effective exchange rate by covering 35 developing countries over period 1975–2014, we investigate degree misalignment while considering factors. First, find that intermediate limit with greater financial openness (FO). Second, non-reciprocal preferential improve price competitiveness, whereas free reciprocal ones be beneficial a higher FO. Third, misalignments fixed decline presence stronger institutions or an IT type monetary policy framework. above results remain robust alternative specifications.