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Remittances, monetary institutions, and autocracies

Garriga, AC and Meseguer, C (2019) 'Remittances, monetary institutions, and autocracies.' Oxford Development Studies. ISSN 1360-0818

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Abstract

© 2019, © 2019 Oxford Department of International Development. How do remittances affect the choice of exchange rate regimes? Previous research shows that remittances, by easing the ‘impossible trinity’, increase the probability of governments adopting fixed exchange rates. However, that research overlooks the conditioning effect of monetary and political institutions. We argue that remittances, by altering recipient governments’ incentives to use monetary policy counter-cyclically, make central bank independence a credible anti-inflationary tool in less credible regimes; that is, autocracies. Thus, autocracies that receive remittances do not need to rely on fixed exchange rates. In this way, remittances open policy alternatives for developing autocracies. Statistical tests on a sample of 87 developing and transitional countries between 1980 and 2010 support our argument.

Item Type: Article
Divisions: Faculty of Social Sciences > Government, Department of
Depositing User: Elements
Date Deposited: 05 Aug 2019 14:54
Last Modified: 28 Aug 2019 18:15
URI: http://repository.essex.ac.uk/id/eprint/25109

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