Theories and empirical models of exchange rate regime choice have established that generally, economic considerations play a primary role in the regime choice decision and political factors play a secondary role in this policy decision. However, in frontier and transition economies, political economy factors play the more dominant role, to ensure electability. Using a sample of 49 countries in sub-Saharan Africa spanning the period 2000 to 2016 and an ordered logit regression model, we find supporting evidence that as the degree of democratization increases, there is a stronger preference for fixed exchange rates, implying that stability is more desirable than an independent monetary policy for re-election.
Biswas, Rita, "Democracy and Exchange Rate Regime Choice in Sub-Saharan Africa" (2020). Campus Conversations in Standish. 17.
To learn more about Dr. Rita Biswas, Associate Professor in the School of Business at the University at Albany, please click on the link below: