Abstract
This article studies the connection between political instability and the sustainability of an exchange rate regime. A model based on the credibility of monetary policy shows that political unrest should be correlated with the adoption of flexible exchange rates. That intuition is tested using various measures of political instability on a panel of 125 countries between 1980 and 1994.
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Méon, PG., Rizzo, JM. The Viability of Fixed Exchange Rate Commitments: Does Politics Matter? A Theoretical and Empirical Investigation. Open Economies Review 13, 111–132 (2002). https://doi.org/10.1023/A:1013916013825
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DOI: https://doi.org/10.1023/A:1013916013825