This paper assesses the nature of fiscal discipline under alternative exchange rate regimes. First, it shows in a simple theoretical framework that fiscal agencies under a currency union with a fixed exchange rate can have the largest incentive to overspend or ""free-ride"" (compared to those...

This paper assesses the nature of fiscal discipline under alternative exchange rate regimes. First, it shows that fiscal agencies under a currency union with a fixed exchange rate can have a larger incentive to overspend or "free ride" than those under other exchange rate regimes, owing to the...

Using countries' de facto exchange rate regimes during 1985-2002, this paper analyzes the determinants of exits from pegged regimes, where exits involve shifts to more or less flexible regimes, or adjustments within the existing regime. Distinguishing episodes characterized by "exchange market...

This paper identifies the institutional and operational requisites for transitions to floating exchange rate regimes. In particular, it explores key issues underlying the transition, including developing a deep and liquid foreign exchange market, formulating intervention policies consistent with...

The Eastern Caribbean Currency Union (ECCU) countries share a common currency, the EC dollar, which has been pegged to the U.S. dollar at the same rate for more than three decades. This paper examines the influence of the peg on ECCU price stability, and analyzes whether absolute Purchasing...