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Democratization and real exchange rates

Furlan, Benjamin and Gächter, Martin and Krebs, Bob and Oberhofer, Harald (2016) Democratization and real exchange rates. Scottish Journal of Political Economy, 63 (2). pp. 216-242. ISSN 1467-9485

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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.

Item Type: Article
Additional Information: This is the peer reviewed version of the following article, which has been published in final form at http://dx.doi.org/10.1111/sjpe.12088]. This article may be used for non-commercial purposes in accordance with Wiley Terms and Conditions for Self-Archiving. The authors also gratefully acknowledge financial support for this research provided by the Austrian National Bank (Jubiläumsfonds), grant number 14383.
Keywords: Real exchange rates, democratization, difference-in-differences-estimator, matching estimators
Divisions: Departments > Volkswirtschaft > Internationale Wirtschaft
Version of the Document: Accepted for Publication
Depositing User: Gertraud Novotny
Date Deposited: 08 Aug 2017 13:05
Last Modified: 09 Dec 2017 14:35
Related URLs:
FIDES Link: https://bach.wu.ac.at/d/research/results/71254/
URI: http://epub.wu.ac.at/id/eprint/5691


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