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.
| Identifer | oai:union.ndltd.org:VIENNA/oai:epub.wu-wien.ac.at:5691 |
| Date | January 2016 |
| Creators | Furlan, Benjamin, Gächter, Martin, Krebs, Bob, Oberhofer, Harald |
| Publisher | Wiley |
| Source Sets | Wirtschaftsuniversität Wien |
| Language | English |
| Detected Language | English |
| Type | Article, PeerReviewed |
| Format | application/pdf |
| Relation | http://dx.doi.org/10.1111/sjpe.12088, http://eu.wiley.com/WileyCDA/, http://epub.wu.ac.at/5691/ |
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