A Political-Economic Model of the Choice of Exchange Rate Regime
December 1, 2002
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Summary
Facing electoral uncertainty, a government chooses its exchange regime in a trade-off among three incentives: (i) tying the hands of its opponent should it lose the election; (ii) facilitating its own future policy implementation should it win the election; and (iii) increasing its chance of reelection.
Subject: Conventional peg, Exchange rate arrangements, Exchange rate flexibility, Expenditure, Foreign exchange, Inflation, Prices
Keywords: budget constraint, choice of a government, Conventional peg, exchange rate, Exchange rate arrangements, Exchange rate flexibility, exchange rate regimes, exchange regime, incumbent government, incumbent's regime policy, Inflation, political economy, regime choice, WP
Pages:
19
Volume:
2002
DOI:
Issue:
212
Series:
Working Paper No. 2002/212
Stock No:
WPIEA2122002
ISBN:
9781451874907
ISSN:
1018-5941
