Consistency versus credibility: how do countries choose their exchange rate regime?
Fabrizio Carmignani (),
Emilio Colombo () and
Patrizio Tirelli ()
International Finance from University Library of Munich, Germany
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'? In this paper we show that a stable socio-political and an efficient political decision- making process are a necessary prerequisite for choosing a peg and sticking to it. Whenever a country is implementing a de facto peg the same factors signal that the peg is more likely to be announced. Finally these factors explain why regime choices are not reversed.
Keywords: Exchange; Rate; regime; Choice; Exchange; Rate; Regime; Classification; Political; Systems (search for similar items in EconPapers)
JEL-codes: F3 F4 (search for similar items in EconPapers)
Pages: 39 pages
New Economics Papers: this item is included in nep-ifn and nep-pol
Note: Type of Document - pdf; pages: 39
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Working Paper: Consistency versus credibility: how do countries choose their exchange rate regime? (2005)
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Persistent link: https://EconPapers.repec.org/RePEc:wpa:wuwpif:0502001
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