Monetary Policies for Developing Countries: The Role of Corruption

Haizhou Huang and Shang-Jin Wei

No 10093, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper examines the role of corruption in the design of monetary policies for developing countries and obtains several interesting results. First, pegged exchange rates, currency boards, or dollarization, while often prescribed as a solution to the problem of a lack-of-credibility for developing countries, is typically not optimal in countries with serious corruption. Second, the optimal degree of conservatism for a Rogoff (1985)-type central banker is an inverse function of the corruption level. Third, either an optimally-designed inflation target or an optimal conservative central banker is preferableto an exchange rate peg, currency board, or dollarization.

JEL-codes: E52 E58 (search for similar items in EconPapers)
Date: 2003-11
New Economics Papers: this item is included in nep-cba, nep-ifn, nep-mac, nep-mon and nep-pol
Note: IFM ME
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

Published as Huang, Haizhou and Shang-Jin Wei. “Monetary Policies for Developing Countries: The Role of Institutional Quality.” Journal of International Economics 70, 1 (September 2006): 239-252.

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Working Paper: Monetary Policies for Developing Countries: The Role of Corruption (2003)
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