Fear of Floating

Many emerging market countries have suffered nancial crises. One view blames soft pegs for these crises. Adherents of this view suggest that countries move to corner solutions—hard pegs or oating exchange rates. We analyze the behavior of exchange rates, reserves, and interest rates to assess whether there is evidence that country practice is moving toward corner solutions. We focus on whether countries that claim they are oating are indeed doing so. We nd that countries that say they allow their exchange rate to oat mostly do not—there seems to be an epidemic case of “fear of oating.” I