Minority Governments and Exchange Rate Regimes

Examining Evidence from 21 OECD Countries, 1975-1999

Bibliographic Data

ID6261977
AuthorsBumba Mukherjee (0000-0002-3453-601X, Princeton University), David Leblang (0000-0003-1315-3092, University of Colorado, USA)
Year2006
Volume7
Issue4
Pages450-476
Publication date2006-12-01
Peer ReviewedYes
Open AccessYes
TypeARTICLE
VenueEuropean Union Politics (JOURNAL)
Journal identifiersISSN: 1465-1165 • E-ISSN: 1741-2757
PublisherSAGE Publications Inc (PUBLISHER)
DOI10.1177/1465116506069438
OpenAlexW2094277116
LanguageEN
Citations received2
References cited18

We examine the impact of minority governments on the choice of exchange rate regime in advanced OECD democracies after the collapse of the Bretton Woods system. We demonstrate that leaders of minority governments had a lower political discount factor in office than majority governments across advanced OECD democracies and use that finding to motivate a model. The model predicts that leaders of minority governments had strong incentives to switch from a fixed to a floating exchange rate because of a lower discount factor in office. Results from Markov transition models estimated on de facto exchange rates adopted by OECD and West European OECD countries between 1975 and 1999 provide robust statistical support for the model’s prediction. We also briefly discuss how the findings presented in this paper have important implications for understanding the likelihood of expansion of Economic and Monetary Union (EMU) to new democracies in Central and Eastern Europe in the near future

De facto · Economics · European union · Exchange rate · Exchange-rate regime · Incentive · International economics · Macroeconomics · Market economy · Political science · Politics · European Monetary and Fiscal Policies · Fiscal Policies and Political Economy · Global Financial Crisis and Policies

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