Exchange-Rate Policy Attitudes: Direct Evidence from Survey Data
Broz, J. Lawrence
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CitationBroz, J. Lawrence, Jeffry Frieden, and Stephen Weymouth. 2008. Exchange-Rate policy attitudes: Direct evidence from survey data. IMF Staff Papers 55(3): 417–444.
AbstractAnalyses of the political economy of exchange rate policy posit that ﬁrms and individuals in different sectors of the economy have distinct policy attitudes toward the level and stability of the exchange rate. Most such approaches hypothesize that internationally exposed ﬁrms prefer more stable currencies and that producers of tradables prefer a relatively depreciated real exchange rate. As sensible as such expectations may be, there are few direct empirical tests of them. This paper offers micro-level, cross-national evidence on sectoral attitudes about the exchange rate. Using ﬁrm-level data from the World Bank’s World Business Environment Survey, we ﬁnd systematic patterns linking sector of economic activity to exchange rate policy positions. Owners and managers of ﬁrms producing tradable goods prefer greater stability of the exchange rate: in countries with a ﬂoating currency, manufacturers are more likely to report that the exchange rate causes problems for their business. With respect to the level of the exchange rate, we ﬁnd that tradables producers—particularly manufacturers and export producers—are more likely to be unhappy following an appreciation of the real exchange rate than are ﬁrms in nontradable sectors (services and construction). These ﬁndings conﬁrm theoretical expectations about the relationship between economic position and currency policy preferences.
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