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Determinants of the Choice of Exchange Rate Regimes in OIC Countries

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  • Fegheh Majidi , Ali

    (University of Kurdistan)

Abstract

Several political and economic factors are involved in choosing exchange rate policy in Organization of Islamic Cooperation (OIC) countries. In the present study, these factors have been investigated with an emphasis on OCA and political economic factors during 1990 -2014. The result shows that OCA and political economic factors as well as tradable sector are influential on exchange rate policy in OIC countries. In a way that oil revenue, financial development, GDP, openness of the economy, economic development and political instability all tend to increase the probability of pegging the exchange rate regimes, whereas an increasing industrial sector and size of the economy lead to a decrease in the probability of pegging the exchange rate regimes. Inflation, democracy, political system, legislative system, and monetary crises had no significant effect on the exchange rate regime. Also, the results show that the democracy and oil revenue had the highest impact on choosing exchange rate regime and financial development and monetary crises risk had the least impact on choosing exchange rate regime.

Suggested Citation

  • Fegheh Majidi , Ali, 2014. "Determinants of the Choice of Exchange Rate Regimes in OIC Countries," Journal of Money and Economy, Monetary and Banking Research Institute, Central Bank of the Islamic Republic of Iran, vol. 9(3), pages 85-118, April.
    • Handle: RePEc:mbr:jmonec:v:9:y:2014:i:3:p:85-118
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    References listed on IDEAS

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    More about this item

    Keywords

    Exchange rate regime; OIC; OCA theory; Political economy;
    All these keywords.

    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • C01 - Mathematical and Quantitative Methods - - General - - - Econometrics

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