Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/72415
Authors: 
Bohn, Frank
Year of Publication: 
2006
Series/Report no.: 
Working Paper Series, UCD Centre for Economic Research 06/05
Abstract: 
This paper offers a theoretical explanation for the determination of exchange rates under specific conditions which can/could be found in some OECD and newly industrialised countries. In an Obstfeld (1994) framework extended to incorporate government expropriation reneging on a fixed exchange rate promise unambiguously produces short term benefits, but long term losses. The choice of exchange rate regime depends on the combined effect of greediness (expropriation) and impatience (political instability), though not straightforwardly. In particular, similarly stable countries may choose different exchange rate regimes due to different levels of rent-seeking, for instance Mexico and Chile in the 1980s.
Subjects: 
exchange rate regime
monetary policy
fiscal policy
expropriation
political instability
political economy
JEL: 
E42
F41
H29
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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