Exchange Rate Regimes for Post-conflict Recovery

This paper asks whether the choice of the exchange regime matters for economic recovery after civil conflicts. This important aspect of the macroeconomic agenda for post-conflict countries has been largely ignored by the literature. We estimate the effect of the main exchange rate regimes (fixed, managed floating and free float) on overall GDP and export growth. We use a panel of 132 countries (38 post-conflict countries and a control group of 94 economies) for the period 1970-2008. The GDP per capita and export growth impact of the three Exchange rate regimes was assessed in terms of the conditional aid effectiveness in “good” policy environment, where the latter is given by the real exchange rate undervaluation. The evidence suggests that the managed floating regime appears to have an edge on economic performance for post-conflict reconstruction.