The duration of fixed exchange rate regimes

This paper studies the duration of fixed exchange rate regimes. We argue that the probability of an exit from a fixed exchange rate regime depends on the time spent within this regime. In such a context models dealing with duration data are appro-priate, especially because the pattern of duration dependence may be non-monotonic over time. We make use of both the non-parametric Kaplan-Meier estimator and a proportional hazard specification estimated by partial maximum likelihood. The non-parametric results show that the pattern of duration dependence exhibits non-monotonic behaviour. This pattern differs across types of economies. The non-monotonic behaviour persists when we control for time-varying covariates in the proportional hazard specification. Therefore, we conclude that how long a regime has lasted will affect the probability that it will end, in a non-monotonic fashion