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Exchange Rates and Cohesion: Historical Perspectives and Political-Economy Considerations

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  • BARRY EICHENGREEN
  • DAVID LEBLANG

Abstract

We consider the political economy of exchange rate choice and its implications for economic growth from an historical perspective. Previous studies have tended to find only a weak association between the choice of exchange rate regime on the one hand and growth and cohesion on the other. Our findings confirm this negative result, but then go on to explain it by showing that the implications of the exchange rate regime for growth and cohesion are context-specific. They show that the choice of entry rate is important and that when the global monetary regime operates as an engine of deflation it is inadvisable for countries to link up to it. We draw out the implications of these findings for the debate over Britain and the euro. Copyright (c) Blackwell Publishing Ltd 2003.

Suggested Citation

  • Barry Eichengreen & David Leblang, 2003. "Exchange Rates and Cohesion: Historical Perspectives and Political-Economy Considerations," Journal of Common Market Studies, Wiley Blackwell, vol. 41(5), pages 797-822, December.
  • Handle: RePEc:bla:jcmkts:v:41:y:2003:i:5:p:797-822
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    1. Eichengreen, Barry, 1996. "Golden Fetters: The Gold Standard and the Great Depression, 1919-1939," OUP Catalogue, Oxford University Press, number 9780195101133.
    2. Maurice Obstfeld & Alan M. Taylor, 2003. "Sovereign risk, credibility and the gold standard: 1870-1913 versus 1925-31," Economic Journal, Royal Economic Society, vol. 113(487), pages 241-275, April.
    3. Barry Eichengreen & David Leblang, 2003. "Capital account liberalization and growth: was Mr. Mahathir right?," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 8(3), pages 205-224.
    4. Jonathan David Ostry & Anne Marie Gulde & Atish R. Ghosh & Holger C. Wolf, 1995. "Does the Nominal Exchange Rate Regime Matter?," IMF Working Papers 95/121, International Monetary Fund.
    5. repec:hoo:wpaper:e-98-2 is not listed on IDEAS
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