31 Pages Posted: 26 Feb 2009
Date Written: February 1, 2009
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
Hefeker, Carsten, Taxation, Corruption and the Exchange Rate Regime (February 1, 2009). CESifo Working Paper Series No. 2561. Available at SSRN: https://ssrn.com/abstract=1349790
By Manoj Atolia