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Beliefs about Exchange-Rate Stability: Survey Evidence from the Currency Board in Bulgaria

We use unique survey data from Bulgaria’s currency board to examine the reasons for persistent incomplete credibility of a financial stabilization regime. Although it produced remarkably positive effects in terms of sustained low inflation since 1997, the currency board has not achieved full credibility. This is not uncommon in other less-developed countries with fixed exchange rate regimes. Our results reveal that incomplete credibility is explained primarily by concerns about external economic shocks and the persistent high unemployment in the country. Past experiences with high inflation do not rank among the top reasons to expect financial instability in the future.

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File URL: http://icepp.gsu.edu/sites/default/files/documents/icepp/wp/ispwp0424.pdf
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Paper provided by International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University in its series International Center for Public Policy Working Paper Series, at AYSPS, GSU with number paper0424.

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Length: 34 pages
Date of creation: 01 Nov 2004
Date of revision:
Handle: RePEc:ays:ispwps:paper0424
Contact details of provider: Phone: 404-413-0235
Fax: 404-413-0244
Web page: http://aysps.gsu.edu/isp/index.html

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  14. Jean Baptiste Desquilbet & Nikolay Nenovsky, 2004. "Credibility and adjustment: gold standards versus currency boards," William Davidson Institute Working Papers Series 2004-692, William Davidson Institute at the University of Michigan.
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  21. Rzepkowski, Bronka, 2003. "The devaluation expectations in Hong Kong and their determinants," Journal of the Japanese and International Economies, Elsevier, vol. 17(2), pages 174-191, June.
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