اقتصاد سیاسی رژیم نرخ ارز ثابت: تجربه کشورهای پسا کمونیستی

Exchange rate policy changes are not only a function of economic conditions, but are also fundamentally related to political processes. This paper analyzes the propensity of policy makers to relax fixed exchange rate regimes by performing regular realignments. The argument is that when information is scarce as in transition countries in the 1990s, adherence to visible exchange rate commitments gives left wing politicians, the former communists, a useful mechanism to improve their reputation. Empirically, the paper uses a duration model to analyze monthly realignment data from former communist countries from 1990 to 1999 and assesses how a broad range of political and economic factors influence the duration of government fixed rate commitments. In particular, one of the robust findings is that left wing governments are associated with a lower risk of fixed rate realignment.

Exchange rate fluctuations have important distributional implications and negative consequences for international trade and economic growth. In an attempt to limit fluctuation, governments in many developing countries announce currency arrangements that imply some form of anchoring of the exchange rate. A large majority of such commitments, however, prove to be short lived and the recent experience of developing countries provides numerous examples of devaluations, widening of fluctuation bands or leaving a pegged rate altogether. As the mechanisms used to limit exchange rate fluctuations are themselves unstable, the literature has investigated the factors that determine changes to exchange rate regimes. Thus, the extensive literature in international economics has focussed on disequilibria between currency parity and economic fundamentals, market expectations, panics and contagion. Research in political economy, however, suggests that interest groups, broad class constituencies, political institutions and the electoral calendar also affect exchange rate policy. The general argument in this recent research is that politics mediates the impact of macroeconomic factors on exchange rate developments, and, as such, a systematic account of the constraints and incentives of politicians can help anticipate better the timing and circumstances of devaluations, or other changes to exchange rate policy. This paper is a theoretical and empirical investigation of the political economy of realignments to fixed exchange rates in post-communist countries. After 1989, several countries in Eastern Europe and the former Soviet Union announced and introduced currency arrangements that restricted the variability of their exchange rates — from pegged rates, to fluctuation bands and crawling rates.1 In addition, these countries experienced a large variety of changes in exchange rate arrangements — small and large devaluations in pegged rates, changes in the width of fluctuation bands and changes in the devaluation rate of crawling pegs and crawling bands. The theoretical explanation in the paper highlights the public visibility of currency arrangements and the use of exchange rate policy by left wing parties as a mechanism to improve their reputation. Empirically, the paper analyzes monthly data from former communist countries from 1990 to 1999 and assesses how a broad range of political and economic factors influence the duration of government exchange rate commitments. The theoretical explanation and the estimations in this paper are closely related to several areas of research in international economics. First, the paper relies heavily on the structural approach of the literature on the optimal choice of the exchange rate regime2 and uses the results of the speculative attack literature.3 Second, it adds to recent work which focuses on changes and devaluations to fixed exchange rates.4 In particular, we investigate the causes of those exchange rate realignments which, in the terminology of Reinhart and Rogoff (2004), make de jure pegged rate arrangements become de facto floats or de facto bands. Finally, the paper improves the understanding of exchange rate policy in the developing world, not in the least by considering adjustments to the nominal exchange rate under various types of fixed regimes, by explicitly considering exchange rate decisions as political and by evaluating empirically credibility theories of exchange rate fixing.5 On the theoretical front the paper focuses on the dilemma of a partisan policymaker facing the choice of realigning a fixed exchange rate commitment. The policymaker trades off the advantage of maintaining a visible commitment mechanism which enhances the credibility of pursuing a low inflation policy with the costs incurred due to the lack of flexibility to react to downturns under a fixed rate as well as the political costs incurred should fixed rates be abandoned. The political economy literature commonly considers left wing parties to be less inflation averse than the right, and more likely to use inflation to promote job growth (e.g. Hibbs, 1977, Milesi-Ferretti, 1995 and Alesina et al., 1997). Inflation, however, does not result in employment growth if the electoral incentives of the left are anticipated. In the medium to long run, inflation does not produce the growth that the left needs to satisfy its constituency. As such, the left is expected to have a greater need for the credibility that a fixed rate provides and be willing to pay the costs associated with fixed rates (e.g. Milesi-Ferretti, 1995). Furthermore, the reality of developing countries is that fixed rates are adjusted frequently, even if the credibility and confidence building characteristics of a fixed exchange rate regime are undermined or lost if the rules governing the fix are regularly overridden. In this context the paper argues that left wing governments will refrain from actions that damage the credibility of the fixed rate instrument. In particular, the left will be identified with a fixed exchange rate regime in which realignments of the currency arrangement are infrequent, especially when markets are testing the resolve of the government. Empirically, the paper uses the parametric Weibull duration model, which estimates the hazard rate of fixed rate realignments conditional both on time and time-varying covariates. The events considered here are all realignments to an announced fixed exchange rate that move towards a less constraining policy. Similar to other work (e.g. Klein and Marion, 1997) the events are not homogenous. However, the credibility story with respect to political parties and exchange rate policy gives a strong rationale for the use of all realignments as events that need to be explained. If policy maker's credibility and the credibility of the fixed rate is at stake, then even small defections from announced policy can be damaging. This should hold especially since small realignments can postpone or entirely eliminate the need to perform a large realignment. The duration analysis yields a series of important results: Macro conditions affect commitment duration differently for pegged rates, fluctuation bands and crawling rates. For example, real exchange appreciation does not appear to influence realignments under a crawling regime, suggesting that much of inflation is already incorporated in the nominal exchange rate via the announced devaluations. Even so, currency crises appear to prompt realignments to crawling rates, but not to pegged rates. The analysis also shows that left wing governments have a lower expected probability of realigning a fixed rate, in particular in a currency crisis. The left's adherence to currency targets and especially adherence when markets are testing its resolve is supportive evidence that the left is searching to improve its credibility in macroeconomic policy. Finally, the estimations reveal that accounting for political events and institutions helps better predict particular realignments.

At the beginning of transition several post-communist countries had a policy of publicly and visibly making commitments for their exchange rates. Transition countries used fixed exchange rates mainly to gain anti-inflationary credibility. Yet the fixed rate instrument has been realigned frequently and, at times, realignments occurred in situations when currency markets did not appear to press stringently for a change. This paper first seeks to explain the political economy of fixed rate realignments. The explanation revolves around the visibility of announced rules for the behavior of the exchange rate, the visibility of adjustments to such rules and the need of politicians to gain credibility in macro policy. Second, the paper analyzes empirically how a broad range of economic and political factors influence the timing of exchange rate realignments on monthly data from seven former communist countries from 1990 to 1999. The paper addresses several real world features of exchange rate policy that are relevant for developing countries. In particular, the analysis captures the fact that emerging markets use intermediate options for the exchange rate regime and that fixed rates or other announced rules governing the exchange rate regime can and are often adjusted. That is, we investigate the causes of those exchange rate realignments which make de jure pegged rate arrangements become de facto floats or de facto bands. Further, the paper attempts to quantitatively assess the extent to which policy makers are actively trying to build or improve their reputation in macro policy. Frequently developing countries are described in terms of an acute lack of credibility of institutions and politicians. The analysis here investigates the extent to which left wing politicians, the heirs to former communist parties, manage the exchange rate regime with an eye toward becoming more credible with markets and the public. The case has been made before that left wing parties pay the costs associated with fixed rates because of their greater need for credibility. Here we modify the argument in line with the reality that fixed rates are adjusted frequently, even if the confidence building characteristics of a fixed exchange rate regime are undermined. Thus we argue that left wing governments will refrain from actions that damage the credibility of the fixed rate instrument. The left will then be identified with a fixed exchange rate regime in which realignments of the currency while maintaining the fix are infrequent, especially when markets are testing the resolve of the government. The empirical results on data from transition countries are supportive: The left has a lower expected probability of ending currency commitments, even in a currency crisis. Also, the analysis reveals that real exchange appreciation does not influence realignments under a crawling regime, confirming that much of inflation is indeed incorporated in the nominal exchange rate via the announced devaluations. Interestingly, despite this, currency crises appear to prompt realignments to crawling rates, but not to pegged rates. The results suggest that policy makers may feel less bound by the rules of the crawl and have fewer reservations to adjust a crawling peg. Such behavior on the part of policy makers, in turn, would add to the concern that intermediate regimes like the crawl are vulnerable to speculative crises.