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Beliefs about Exchange-Rate Stability: Survey Evidence from the Currency Board in Bulgaria

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Abstract

We use unique survey data from Bulgaria’s currency board to examine the reasons for persistent incomplete credibility of a financial stabilization regime. Although it produced remarkably positive effects in terms of sustained low inflation since 1997, the currency board has not achieved full credibility. This is not uncommon in other less-developed countries with fixed exchange rate regimes. Our results reveal that incomplete credibility is explained primarily by concerns about external economic shocks and the persistent high unemployment in the country. Past experiences with high inflation do not rank among the top reasons to expect financial instability in the future.

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File URL: http://icepp.gsu.edu/sites/default/files/documents/icepp/wp/ispwp0424.pdf
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Bibliographic Info

Paper provided by International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University in its series International Center for Public Policy Working Paper Series, at AYSPS, GSU with number paper0424.

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Length: 34 pages
Date of creation: 01 Nov 2004
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Handle: RePEc:ays:ispwps:paper0424

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Keywords: Credibility; Currency Boards; Financial Stabilization Programs;

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Cited by:
  1. Neven T. Valev, 2005. "From a currency board to the euro: Public attitudes toward unilateral euroization in Bulgaria," William Davidson Institute Working Papers Series wp736, William Davidson Institute at the University of Michigan.

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