Output divergence in fixed exchange rate regimes: Replication package and online appendix

Replication package and online appendix for the paper “Output Divergence in Fixed Exchange Rate Regimes” by Yao Chen and Felix Ward. The replication package includes a readme-file, Stata codes, data, and output files required to reproduce all figures presented in the main text and Online Appendix.

The paper presents empirical evidence for the violation of nominal exchange regime neutrality. We find that fixing the exchange rate is associated with real output losses among countries with a high pre-peg inflation rate. In particular, ten years after fixing the exchange rate a country with a +1 percentage point (ppt) pre-peg wage inflation differential has a 2% lower real GDP per capita level and a 1% lower TFP level. The tradable sector is more affected than the non-tradable sector, which accords with the former’s greater exposure to international arbitrage.