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Beliefs about Exchange‐Rate Stability: Survey Evidence from the Currency Board in Bulgaria

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  • Neven Valev
  • John Carlson

Abstract

Currency pegs seldom achieve full credibility even after delivering low inflation and a stable exchange rate for many years. We use unique survey data from Bulgaria’s currency board to investigate the origins of incomplete credibility. We show that the limitations imposed by the currency board on output stabilization policies are a major source of concern. Many people view the financial stabilization policies as a reason for high unemployment and therefore as unsustainable. Another important factor for low credibility is the concern over potential international shocks. Conversely, past instability does not seem to translate strongly into expectations of future instability.

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  • Neven Valev & John Carlson, 2007. "Beliefs about Exchange‐Rate Stability: Survey Evidence from the Currency Board in Bulgaria," Journal of Economic Policy Reform, Taylor and Francis Journals, vol. 10(2), pages 111-121.
    • Handle: RePEc:taf:jecprf:v:10:y:2007:i:2:p:111-121
    DOI: 10.1080/17487870701346472
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    Cited by:

    1. Begović, Selena & Adnett, Nick & Pugh, Geoff, 2016. "An investigation into the credibility of currency board arrangements in Bosnia and Herzegovina and Bulgaria," Journal of Comparative Economics, Elsevier, vol. 44(3), pages 787-799.
    2. Jean-Baptiste Desquilbet & Nikolay Nenovsky, 2004. "Credibility and Adjustment : Gold Standards versus Currency Boards," CAE Working Papers 11, Aix-Marseille Université, CERGAM.
    3. Neven T Valev, 2006. "From a Currency Board to the Euro: Public Attitudes Toward Unilateral Euroisation in Bulgaria1," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 48(3), pages 480-496, September.

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    JEL classification:

    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
    • F3 - International Economics - - International Finance

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