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The political economy of fixed exchange rate regimes: The experience of post-communist countries

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  • Bodea, Cristina
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    Abstract

    Exchange rate policy changes are not only a function of economic conditions, but are also fundamentally related to political processes. This paper analyzes the propensity of policy makers to relax fixed exchange rate regimes by performing regular realignments. The argument is that when information is scarce as in transition countries in the 1990s, adherence to visible exchange rate commitments gives left wing politicians, the former communists, a useful mechanism to improve their reputation. Empirically, the paper uses a duration model to analyze monthly realignment data from former communist countries from 1990 to 1999 and assesses how a broad range of political and economic factors influence the duration of government fixed rate commitments. In particular, one of the robust findings is that left wing governments are associated with a lower risk of fixed rate realignment.

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    Bibliographic Info

    Article provided by Elsevier in its journal European Journal of Political Economy.

    Volume (Year): 26 (2010)
    Issue (Month): 2 (June)
    Pages: 248-264

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    Handle: RePEc:eee:poleco:v:26:y:2010:i:2:p:248-264

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    Web page: http://www.elsevier.com/locate/inca/505544

    Related research

    Keywords: Fixed exchange rate Credibility Realignment Partisanship Democratization Post-communist;

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    Cited by:
    1. Chang, Chun Ping & Berdiev, Aziz N., 2011. "The political economy of energy regulation in OECD countries," Energy Economics, Elsevier, vol. 33(5), pages 816-825, September.
    2. Berdiev, Aziz N. & Kim, Yoonbai & Chang, Chun Ping, 2012. "The political economy of exchange rate regimes in developed and developing countries," European Journal of Political Economy, Elsevier, vol. 28(1), pages 38-53.
    3. Niklas Potrafke, 2012. "Is German domestic social policy politically controversial?," Public Choice, Springer, vol. 153(3), pages 393-418, December.

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