Affordable Access

Publisher Website

The political economy of exchange rate regimes in developed and developing countries

Authors
Journal
European Journal of Political Economy
0176-2680
Publisher
Elsevier
Publication Date
Volume
28
Issue
1
Identifiers
DOI: 10.1016/j.ejpoleco.2011.06.007
Keywords
  • Political Economy
  • Exchange Rate Regimes
  • Panel Multinomial Logit Model
Disciplines
  • Economics
  • Mathematics
  • Political Science

Abstract

Abstract This paper examines the influence of government ideology, political institutions and globalization on the choice of exchange rate regime via panel multinomial logit approach using annual data over the period of 1974–2004 in a panel of 180 countries: 26 developed and 154 developing. We provide evidence that government ideology, political institutions and globalization are important determinants of the choice of exchange rate regime. In particular, we find that left-wing governments, democratic institutions, central bank independence and financial development increase the likelihood of choosing a flexible regime, whereas more globalized countries have a higher probability of implementing a fixed regime. More importantly, we find that political economy factors have different effects on the choice of exchange rate regime in developed and developing countries. All our results are robust to panel ordered probit model.

There are no comments yet on this publication. Be the first to share your thoughts.