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Determinants of the choice of exchange rate regime in oil-exporting countries

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  • Aliyev, Ruslan
  • Zeynalov, Ayaz

Abstract

This study examines the factors that determine exchange rate regime choice in oil-exporting countries. We run ordered logit regressions for an unbalanced panel dataset of 138 countries covering 1974–2021 and confirm that oil-exporting countries are more likely to adopt a fixed exchange rate regime than other countries. The main reason for this is that, given the volatility and uncertainty of oil revenues, traditional monetary policy tools are ineffective, resulting in the exchange rate serving as a nominal anchor. This is supported by our findings on the distinct roles of output volatility, government spending, fiscal cyclicality, and central bank independence in determining exchange rate regimes in oil-exporting countries.

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  • Aliyev, Ruslan & Zeynalov, Ayaz, 2025. "Determinants of the choice of exchange rate regime in oil-exporting countries," Economic Systems, Elsevier, vol. 49(2).
    • Handle: RePEc:eee:ecosys:v:49:y:2025:i:2:s0939362524000918
    DOI: 10.1016/j.ecosys.2024.101269
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    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • Q30 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - General

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