This paper assesses the role of the exchange rate regime in explaining how emerging market economies fared

in, and are recovering from, the recent global financial crisis. Despite the limitations inherent in using a dataset with a small cross section, using a variety of robustness checks and multiple specifications to control for potential determinants, the paper presents some evicence about the growth experience of pegs for both the crisis and recovery periods. First, during the crisis period, controlling for regime switching, alternative definition to clsssify pegs, and other potential factors affecting growth performance, we find that countries with pegged regimes fare no worse than those with floats. In addition, variables capturing trade exposurepartner growth and the terms of trade shockand variables proxying the financial channelreserves and short term debtare important factors contributing to the growth performance during the crisis. Second, in contrast to the crisis period, during the recovery period 20102011, countries with pegged regimes appear to be faring worse than those with floats. In addition to a significant rebound effect from the crisis, the only important factor contributing to the growth recovery is trading partner growth, as adjustment tools like fiscal policy may have not had enough time to take effect. Third, trade and financial linkages amplified the growth collapse during the crisis and trade linkages are currently helping the recovery from the crisis. Finally, given that the results on growth recovery are based on projections, we raise a flag about suggestive evidence of biases in perceptions about pegs growth performance, which could account for the finding of slower growth recovery for 201011 under pegs. The asymmetric effect of the exchange rate regime during the crisis compared to the recovery from the crisis could be explained as follows. During the crisis, some countries moved towards more flexible arrangementsessentially adding the exchange rate in their policy adjustment tools when this instrument was previously forgone. Other good performers in the crisis let their real exchange rates move in the right directionthat is, in the

direction of reducing initial misalignmentsand had better initial conditions in terms of reserve coverage of short-term debt. But, getting out of the crisis appears to be a different story, particularly in light of the fact thatat least so farexternal demand has not picked up and has had a much smaller impact compared to during the crisis. In addition, adjustment tools such as fiscal expenditure have had no time to take effect, leaving the exchange rate regime alone to carry the load for the recovery.