Taxation, Corruption and the Exchange Rate Regime
HWWA Institute of International Economics; CESifo (Center for Economic Studies and Ifo Institute for Economic Research)
February 1, 2009
CESifo Working Paper Series No. 2561
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.
Number of Pages in PDF File: 31
Keywords: exchange rate regime, monetary policy, fiscal policy, seigniorage, corruption, developing and transition countries
JEL Classification: D72, E63, F33
Date posted: February 26, 2009
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