Do Fixed Exchange Rates Induce More Fiscal Discipline?

Do Fixed Exchange Rates Induce More Fiscal Discipline?
Conventional wisdom has held that a fixed exchange rate regime induces more fiscal discipline, but Tornell and Velasco (1995, 1998) argue the opposite. Using a dynamic model with fragmented fiscal policymaking, this paper evaluates the two arguments in a single framework and shows that (1) future punishment against fiscal laxity exists under... READ MORE...

Publication date: April 2003
ISBN 9781451850123
$15.00

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