Taxation, Corruption and the Exchange Rate Regime
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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 that
there is convergence between countries with regard to the level of
corruption.
Keywords
Fiscal Pol- icy, Corruption, Exchange Rate Regime, Developing and Transition Countries., Seigniorage, Monetary Policy