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Title:Can the exchange rate regime influence corruption? PDF Logo
Authors:Popkova, Katherina
Issue Date:2011
Series/Report no.:Volkswirtschaftliche Diskussionsbeiträge, Universität Siegen, Fakultät III: Wirtschaftswissenschaften, Wirtschaftsinformatik und Wirtschaftsrecht 148-11
Abstract:This paper analyses the influence of the exchange rate regime of a country on the level of tolerated corruption with a special focus on the interdependency of monetary and fiscal policies. Using a simple theoretical framework based on Barro-Gordon-Model I compare independent monetary policy with a tight peg arrangement in order to find out which regime is more likely to induce governments to intensify the fight against corruption. It is shown that if corruption has a considerable positive impact on output, a tight peg regime can increase tolerated corruption. However, if corruption has a negative effect on output, a pegged exchange rate regime will lead to a lower level of tolerated corruption. The issue of particular interest appears to be the finding that a strong positive impact of corruption on output can induce governments to choose a pegging regime while a weak positive impact of corruption (and a negative influence of corruption even more) provides an incentive to keep monetary independence.
Subjects:Exchange Rate Regime
Monetary Policy
Fiscal Policy
Corruption
JEL:E52
E58
E61
E63
F33
Document Type:Working Paper
Appears in Collections:Volkswirtschaftliche Diskussionsbeiträge, Universität Siegen

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