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What Does Really Discipline Fiscal Policy in Emerging Markets?: the Role and Dynamics of Exchange Rate Regimes

  • Enrique Alberola
  • Luis Molina

    (Banco de España)

Fixing the exchange rate stabilises inflation and reduces monetary seignoriage, a key source of financing under the fiscal dominance hypothesis. However, the link between fixed exchange rate regimes and fiscal discipline in emerging markets has been found to be weak. This paper thoroughly reviews the issue through three venues. First, an alternative measure to gauge fiscal discipline –the so called shadow balance, inclusive of seignoriage revenues

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Article provided by Centro de Estudios Monetarios Latinoamericanos in its journal Money Affairs.

Volume (Year): XVI (2003)
Issue (Month): 2 (July-December)
Pages: 165-192

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Handle: RePEc:cml:moneya:v:xvi:y:2003:i:2:p:165-192
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