Home » Monetary Policies for Developing Countries: The Role of Corruption by Haizhou Huang
Monetary Policies for Developing Countries: The Role of Corruption Haizhou Huang

Monetary Policies for Developing Countries: The Role of Corruption

Haizhou Huang

Published May 9th 2014
ISBN : 9781282049710
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30 pages
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This paper examines the role of corruption in the design of monetary policies for developing countries in a framework of fiscal and monetary interaction and obtains several interesting results. First, pegged exchange rates, currency boards, orMoreThis paper examines the role of corruption in the design of monetary policies for developing countries in a framework of fiscal and monetary interaction and obtains several interesting results. First, pegged exchange rates, currency boards, or dollarization, while often prescribed as a solution to the problem of a lack of credibility for developing countries, is typically not credible in countries with serious corruption. Second, the optimal degree of conservatism for a Rogoff (1985)-type central banker is an inverse function of the corruption level. Third, either an optimally designed inflation target or an optimal-conservative central banker is preferable to an exchange rate peg, currency board, or dollarization.