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Exchange Rate and Monetary Policy for Sustainable Post-conflict Transition

Author

Listed:
  • Ibrahim Elbadawi
  • Raimundo Soto

    (Instituto de Economía. Pontificia Universidad Católica de Chile.)

Abstract

This paper asks the question as to whether the choice of the exchange rate regime matters for post-conflict economic recovery and macro stabilization. Though an important aspect of the macroeconomic agenda for post-conflict, it has however, been largely ignored by the literature. We identify three main exchange rate regimes (fixed, managed floating and free float) and estimate their marginal contributions to post-conflict economic recovery and macro stabilization in the context of fully specified models of four pivotal macroeconomic variables: per capita GDP and export growth, the demand for money balances and inflation. The paper estimates extended versions of these models in a panel over 1970-2008 covering 132 countries, including the 38 post-conflict countries and 94 peaceful ones as a control group. The evidence suggests that the managed floating regime appears to have an edge on some critical areas of economic performance for post-conflict reconstruction.

Suggested Citation

  • Ibrahim Elbadawi & Raimundo Soto, 2010. "Exchange Rate and Monetary Policy for Sustainable Post-conflict Transition," Documentos de Trabajo 392, Instituto de Economia. Pontificia Universidad Católica de Chile..
    • Handle: RePEc:ioe:doctra:392
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    File URL: https://www.economia.uc.cl/docs/doctra/dt-392.pdf
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    References listed on IDEAS

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    Keywords

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    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • O43 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth
    • N40 - Economic History - - Government, War, Law, International Relations, and Regulation - - - General, International, or Comparative

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