Working Paper: NBER ID: w9809
Authors: Alberto Alesina; Alexander Wagner
Abstract: We use data on announced and actual exchange rate arrangements to ask which countries follow de facto regimes different from their de iure ones, that is, do not do what they say. Our results suggest that countries with poor institutional quality have difficulty in maintaining pegging and abandon it more often. In contrast, countries with relatively good institutions display fear of floating, i.e. they manage more than announced, perhaps to signal their differences from those countries incapable of maintaining promises of monetary stability.
Keywords: No keywords provided
JEL Codes: F3
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| poor institutional quality (O17) | increased tendency to abandon pegged exchange rate regimes (F31) |
| good institutional quality (L15) | fear of floating (F31) |
| poor institutional quality (O17) | poor macroeconomic performance and instability (E60) |
| foreign-denominated liabilities (F34) | choice to fix exchange rates (F31) |