Exchange Rates and Cohesion: Historical Perspectives and Political-Economy Considerations

26 Pages Posted: 17 Mar 2004

See all articles by Barry Eichengreen

Barry Eichengreen

University of California, Berkeley; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)

David A. Leblang

University of Virginia; University of Virginia - College of Arts and Sciences; University of Virginia - Woodrow Wilson Department of Politics; University of Virginia - Frank Batten School of Leadership and Public Policy

Abstract

We consider the political economy of exchange rate choice and its implications for economic growth from an historical perspective. Previous studies have tended to find only a weak association between the choice of exchange rate regime on the one hand and growth and cohesion on the other. Our findings confirm this negative result, but then go on to explain it by showing that the implications of the exchange rate regime for growth and cohesion are context-specific. They show that the choice of entry rate is important and that when the global monetary regime operates as an engine of deflation it is inadvisable for countries to link up to it. We draw out the implications of these findings for the debate over Britain and the euro.

Suggested Citation

Eichengreen, Barry and Leblang, David A., Exchange Rates and Cohesion: Historical Perspectives and Political-Economy Considerations. Available at SSRN: https://ssrn.com/abstract=513639

Barry Eichengreen (Contact Author)

University of California, Berkeley ( email )

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National Bureau of Economic Research (NBER)

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Centre for Economic Policy Research (CEPR)

London
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David A. Leblang

University of Virginia ( email )

PO Box 400787
University of Virginia
Charlottesville, VA 22904
United States

University of Virginia - College of Arts and Sciences ( email )

VA
United States

University of Virginia - Woodrow Wilson Department of Politics ( email )

PO Box 400787
University of Virginia
Charlottesville, VA 22904
United States

University of Virginia - Frank Batten School of Leadership and Public Policy ( email )

235 McCormick Rd.
P.O. Box 400893
Charlottesville, VA 22904-4893
United States

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