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Endogenous changes in the exchange rate regime: A bureaucratic incentive model


  • Iljoong Kim
  • Inbae Kim



Public choice submits that legal changes can be endogenous in such a way that they are manipulated by bureaucrats who want to maximize rents from transactions with various interest groups. This paper takes the change in exchange rate regimes to empirically examine the premise. It offers a two-stage method, in which we first show that the exchange rate is influenced by interest group pressures, and subsequently that the 1990 market average regime (MAR), as a phase-in policy in Korea, was introduced mainly to serve bureaucratic incentives. This method is expected to be useful to a host of countries for various studies attempting to test a possible existence of bureaucratic or other hidden motivations behind any “isolated'' event of policy change. Copyright Springer Science + Business Media, Inc. 2005

Suggested Citation

  • Iljoong Kim & Inbae Kim, 2005. "Endogenous changes in the exchange rate regime: A bureaucratic incentive model," Public Choice, Springer, vol. 125(3), pages 339-361, December.
  • Handle: RePEc:kap:pubcho:v:125:y:2005:i:3:p:339-361
    DOI: 10.1007/s11127-005-4601-2

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    References listed on IDEAS

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    Cited by:

    1. Iljoong Kim & Sungkyu Park, 2010. "Eminent domain power and afterwards: Leviathan’s post-taking opportunism," Public Choice, Springer, vol. 143(1), pages 209-227, April.
    2. Kim, Iljoong & Kim, Inbae, 2007. "Endogenous selection of monetary institutions: With the case of discount windows and bureaucratic discretion," International Review of Law and Economics, Elsevier, vol. 27(3), pages 330-350, September.
    3. Kim, Iljoong & Kim, Inbae, 2008. "Interest group pressure explanations for the yen-dollar exchange rate movements: Focusing on the 1980s," Journal of the Japanese and International Economies, Elsevier, vol. 22(3), pages 364-382, September.

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