Structural Factors Affecting Exchange Rate Volatility

The paper examines factors affecting exchange rate volatility, with an emphasis on structural features of the foreign exchange regime. It draws for the first time on detailed survey data collected by the IMF on foreign exchange market organization and regulations. Key findings are that decentralized dealer markets, regulations on the use of domestic currency by nonresidents, acceptance of Article VIII obligations, and limits on banks'' foreign exchange positions are associated with lower exchange rate volatility. The paper also provides support for earlier results on the influence of macroeconomic conditions and the choice of exchange rate regime on volatility.Structural adjustment;Exchange rates;foreign exchange, exchange rate, exchange rate volatility, foreign exchange market, exchange rate regimes, exchange rate regime, exchange restrictions, nominal effective exchange rate, real exchange rate, exchange markets, effective exchange rate, foreign exchange markets, real exchange rate volatility, multiple currency practices, daily exchange rate, flexible exchange rate regimes, capital flows, foreign exchange operations, prevailing exchange rate, exchange operations, international trade, nominal exchange rates, nominal exchange rate, flexible exchange rate, foreign exchange transactions, volatile exchange rates, basket of currencies, exchange rate fluctuations, exchange rate movements, exchange rate behavior, international financial statistics, exchange arrangements, exchange transactions, exchange rate policy, exchange reserves, exchange rate arrangements, floating exchange rates, international finance, international financial