Determinants of the choice of exchange rate regime in oil-exporting countries

Ruslan Aliyev and Ayaz Zeynalov

Economic Systems, 2025, vol. 49, issue 2

Abstract: This study examines the factors that determine exchange rate regime choice in oil-exporting countries. We run ordered logit regressions for an unbalanced panel dataset of 138 countries covering 1974–2021 and confirm that oil-exporting countries are more likely to adopt a fixed exchange rate regime than other countries. The main reason for this is that, given the volatility and uncertainty of oil revenues, traditional monetary policy tools are ineffective, resulting in the exchange rate serving as a nominal anchor. This is supported by our findings on the distinct roles of output volatility, government spending, fiscal cyclicality, and central bank independence in determining exchange rate regimes in oil-exporting countries.

Keywords: Monetary policy; Exchange rate regime; Oil-exporting countries (search for similar items in EconPapers)
JEL-codes: E52 E58 Q30 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecosys:v:49:y:2025:i:2:s0939362524000918

DOI: 10.1016/j.ecosys.2024.101269

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