Exploring different views of exchange rate regime choice
Fabrizio Carmignani (),
Emilio Colombo () and
Patrizio Tirelli ()
Journal of International Money and Finance, 2008, vol. 27, issue 7, 1177-1197
The empirical distinction between de facto and de jure exchange rate regimes raises a number of interesting questions. Which factors may induce a de facto peg? Why do countries enforce a peg but do not announce it? Why do countries "break their promises"? We show that a stable socio-political environment and an efficient political decision-making process are a necessary prerequisite for choosing a peg and sticking to it, challenging the view that sees the exchange rate as a commitment device. Policymakers seem rather concerned with regime sustainability in the face of adverse economic and socio-political fundamentals.
Keywords: Exchange; rate; regimes; de; facto; classification; Credibility; Consistency (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jimfin:v:27:y:2008:i:7:p:1177-1197
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