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Documento de trabajo

Exchange Rate and Monetary Policy for Sustainable Post-conflict Transition

  • person Raimundo Soto

    Ibrahim Elbadawi

  • class Documento de Trabajo IE-PUC, Nº 392, 2010

Abstract: This paper asks the question as to whether the choice of the exchange rate regime matters for postconflict economic recovery and macro stabilization. Though an important aspect of the macroeconomic agenda for post-conflict, it has however, been largely ignored by the literature. We identify three main exchange rate regimes (fixed, managed floating and free float) and estimate their marginal contributions to post-conflict economic recovery and macro stabilization in the context of fully specified models of four pivotal macroeconomic variables: per capita GDP and export growth, the demand for money balances and inflation. The paper estimates extended versions of these models in a panel over 1970-2008 covering 132 countries, including the 38 post-conflict countries and 94 peaceful ones as a control group. The evidence suggests that the managed floating regime appears to have an edge on some critical areas of economic performance for post-conflict reconstruction.

Keywords: Monetary policy, civil wars, transition, economic growth.

JEL: E52, O43, N40