Exchange Rate and Monetary Policy for Sustainable Post-conflict Transition

Ibrahim Elbadawi and Raimundo Soto

No 392, Documentos de Trabajo from Instituto de Economia. 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.

Keywords: Monetary policy; civil wars; transition; economic growth (search for similar items in EconPapers)
JEL-codes: E52 N40 O43 (search for similar items in EconPapers)
Date: 2010
New Economics Papers: this item is included in nep-ifn, nep-mac and nep-mon
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Persistent link: https://EconPapers.repec.org/RePEc:ioe:doctra:392

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