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Taxation, corruption and the exchange rate regime

  • Carsten Hefeker

The paper analyzes the relation between institutional quality, such as corruption, in a country and its monetary regime. It is shown that a credibly fixed exchange rate to a low inflation country, like a currency board, can reduce corruption and improve the fiscal system. A monetary union, however, has ambiguous effects. I find that there is convergence between countries with regard to the level of corruption.

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Article provided by Elsevier in its journal Journal of Macroeconomics.

Volume (Year): 32 (2010)
Issue (Month): 1 (March)
Pages: 338-346

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Handle: RePEc:eee:jmacro:v:32:y:2010:i:1:p:338-346
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