Monetary Policies for Developing Countries: The Role of Corruption / Haizhou Huang, Shang-Jin Wei.

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Huang, Haizhou

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Material type: Text

TextSeries: Working Paper Series (National Bureau of Economic Research) ; no. w10093.Publication details: Cambridge, Mass. National Bureau of Economic Research 2003.Description: 1 online resource: illustrations (black and white)Subject(s):

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Abstract: This paper examines the role of corruption in the design of monetary policies for developing countries 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 optimal 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 preferableto an exchange rate peg, currency board, or dollarization.

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Item type	Home library	Collection	Call number	Status	Date due	Barcode	Item holds
Working Paper	Biblioteca Digital	Colección NBER	nber w10093 (Browse shelf(Opens below))	Not For Loan

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Previous	nber w10090 The Environment and Globalization /	nber w10091 Getting Inside the "Black Box" of Head Start Quality: What Matters and What Doesn't? /	nber w10092 Health Insurance Coverage and the Macroeconomy /	nber w10093 Monetary Policies for Developing Countries: The Role of Corruption /	nber w10094 On the Writing and the Interpretation of Contracts /	nber w10095 Crisis Resolution: Next Steps /	nber w10096 The Developed World's Demographic Transition - The Roles of Capital Flows, Immigration, and Policy /	Next

November 2003.

This paper examines the role of corruption in the design of monetary policies for developing countries 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 optimal 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 preferableto an exchange rate peg, currency board, or dollarization.