Taxation, Corruption and the Exchange Rate Regime

31 Pages Posted: 26 Feb 2009  

Carsten Hefeker

HWWA Institute of International Economics; CESifo (Center for Economic Studies and Ifo Institute for Economic Research)

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

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

Carsten Hefeker (Contact Author)

HWWA Institute of International Economics ( email )

Heimhuder Strasse 71
20347 Hamburg, DE Hamburg 20148
Germany

CESifo (Center for Economic Studies and Ifo Institute for Economic Research)

Poschinger Str. 5
Munich, DE-81679
Germany

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