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

Neven Valev and John Carlson

William Davidson Institute Working Papers Series from William Davidson Institute at the University of Michigan

Abstract: 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.

Keywords: Credibility; Currency Boards; Financial Stabilization Programs (search for similar items in EconPapers)
JEL-codes: E5 F3 (search for similar items in EconPapers)
Pages: 30 pages
Date: 2004-06-01
New Economics Papers: this item is included in nep-ifn, nep-mac, nep-mon and nep-tra
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Related works:
Journal Article: Beliefs about Exchange‐Rate Stability: Survey Evidence from the Currency Board in Bulgaria (2007)
Working Paper: Beliefs about Exchange-Rate Stability: Survey Evidence from the Currency Board in Bulgaria (2004)
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