Democratization and Real Exchange Rates,

27 Pages Posted: 4 Apr 2016

See all articles by Benjamin Furlan

Benjamin Furlan

University of Salzburg - Department of Economics and Social Sciences

Martin Gächter

Oesterreichische Nationalbank (OeNB)

Bob Krebs

University of Innsbruck

Harald Oberhofer

Vienna University of Economics and Business - Department of Economics; Austrian Institute of Economic Research (WIFO)

Multiple version iconThere are 2 versions of this paper

Date Written: May 2016

Abstract

In this article, we combine two so far separate strands of the economic literature and argue that democratization leads to a real exchange rate appreciation. We test this hypothesis empirically for a sample of countries observed from 1980 to 2007 by combining a difference‐in‐difference approach with propensity score matching estimators. Our empirical results reveal a strong and significant finding: democratization causes real exchange rates to appreciate. Consequently, the ongoing process of democratization observed in many parts of the world is likely to reduce exchange rate distortions.

Suggested Citation

Furlan, Benjamin and Gächter, Martin and Krebs, Bob and Oberhofer, Harald, Democratization and Real Exchange Rates, (May 2016). Scottish Journal of Political Economy, Vol. 63, Issue 2, pp. 216-242, 2016. Available at SSRN: https://ssrn.com/abstract=2758413 or http://dx.doi.org/10.1111/sjpe.12088

Benjamin Furlan (Contact Author)

University of Salzburg - Department of Economics and Social Sciences ( email )

Residenzplatz 9
Salzburg, 5010
Austria

HOME PAGE: http://www.uni-salzburg.at/sowi/furlan

Martin Gächter

Oesterreichische Nationalbank (OeNB)

Otto-Wagner-Platz 3, PO Box 61
Vienna,
1010 Vienna, A-1011
Austria

Bob Krebs

University of Innsbruck ( email )

Universitätsstraße 15
Innsbruck, Innsbruck 6020
Austria

Harald Oberhofer

Vienna University of Economics and Business - Department of Economics ( email )

Welthandelsplatz 1
A-1020 Vienna
Austria

Austrian Institute of Economic Research (WIFO) ( email )

P.O. Box 91
Wien, A-1103
Austria

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