Democratization and real exchange rates

Arbeitspapier

This paper empirically assesses how democratization affects real exchange rates. Specifically, in line with the democratic peace theory we argue that democratization reduces currency undervaluation, and thus, might bring misalignments in foreign exchange markets to an end. We test this hypothesis for a sample of countries observed from 1980 to 2007. Econometrically, we combine a difference-in-difference (DID) approach with propensity score matching estimators. Our estimation results reveal that democratization causes real exchange rates to appreciate, lending empirical support to the democratic peace theory in this specific economic context.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Working Papers in Economics and Finance ; No. 2012-06

Classification and Topics

• Classification: Wirtschaft ; Single Equation Models; Single Variables: Cross-Sectional Models; Spatial Models; Treatment Effect Models; Quantile Regressions ; Single Equation Models; Single Variables: Panel Data Models; Spatio-temporal Models ; International Economic Order and Integration ; Foreign Exchange ; International Relations and International Political Economy: Other ; Economic History: Financial Markets and Institutions: General, International, or Comparative
• Subject: Real exchange rates ; democratization ; democratic peace theory ; difference-in-differences-estimator ; matching estimators

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Furlan, Benjamin ; Gächter, Martin ; Krebs, Bob ; Oberhofer, Harald
• Event: Veröffentlichung
• (who): University of Salzburg, Department of Social Sciences and Economics
• (where): Salzburg
• (when): 2012

Further information

• Handle: http://hdl.handle.net/10419/71854
• Last update: 10.03.2025, 11:43 AM CET