Taxation, Corruption and the Exchange Rate Regime
31 Pages Posted: 26 Feb 2009
Date Written: February 1, 2009
Abstract
The paper analyzes the relation between institutional quality, such as corruption, in a country and its monetary regime. It is shown that a credibly fixed exchange rate to a low inflation country, like a currency board, can reduce corruption and improve the fiscal system. A monetary union, however, has ambiguous effects. I find that there is convergence between countries with regard to the level of corruption.
Keywords: exchange rate regime, monetary policy, fiscal policy, seigniorage, corruption, developing and transition countries
JEL Classification: D72, E63, F33
Suggested Citation: Suggested Citation
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