Discipline, Signaling, and Currency Boards

Maria‐Angels Oliva, Luis A. Rivera‐Batiz and Amadou Sy
Authors registered in the RePEc Author Service: Luis Rivera-Batiz

Review of International Economics, 2001, vol. 9, issue 4, 608-625

Abstract: The paper models the choice between currency boards (CBs) and adjustable pegs (or managed floating). Countries adopting CBs have grown faster and inflated less on average than countries adopting other regimes. The explanation hinges on key features of CBs: policy discipline and inflation credibility. The authors find separating equilibria in which a weak government chooses a CB as a discipline device while a tough government chooses a standard peg for its policy flexibility. Paradoxically, the weak government can then outperform the tough government on average. In simulations performed, CBs welfare can exceed peg welfare even when unemployment persistence is strong.

Date: 2001
References: Add references at CitEc
Citations: View citations in EconPapers (7)

Downloads: (external link)
https://doi.org/10.1111/1467-9396.00303

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bla:reviec:v:9:y:2001:i:4:p:608-625

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=0965-7576

Access Statistics for this article

Review of International Economics is currently edited by E. Kwan Choi

More articles in Review of International Economics from Wiley Blackwell
Bibliographic data for series maintained by Wiley Content Delivery ().