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  • Exploring different views of the exchange rate regime choice

    Author(s)
    Carmignani, Fabrizio
    Colombo, Emilio
    Tirelli, Patrizio
    Griffith University Author(s)
    Carmignani, Fabrizio
    Tirelli, Patrizio
    Year published
    2008
    Metadata
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    Abstract
    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.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.
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    Journal Title
    Journal of International Money and Finance
    Volume
    27
    Issue
    7
    DOI
    https://doi.org/10.1016/j.jimonfin.2008.06.004
    Subject
    Macroeconomics (incl. Monetary and Fiscal Theory)
    Applied Economics
    Econometrics
    Banking, Finance and Investment
    Publication URI
    http://hdl.handle.net/10072/47338
    Collection
    • Journal articles

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