Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
962877 | Journal of International Economics | 2006 | 14 Pages |
Abstract
Weak public institutions, including high levels of corruption, characterize many developing countries. We demonstrate that this feature has important implications for the design of monetary policymaking institutions. We find that a pegged exchange rate or dollarization, while sometimes prescribed as a solution to the credibility problem, is typically not appropriate for countries with poor institutions. Such an arrangement is inferior to a Rogoff-style conservative central banker, whose optimal degree of conservatism is proportional to the quality of institutions. Finally, we cast doubt on the notion that a low inflationary framework can induce governments to improve public institutions.
Related Topics
Social Sciences and Humanities
Economics, Econometrics and Finance
Economics and Econometrics
Authors
Haizhou Huang, Shang-Jin Wei,