Say you fix,enjoy and relax. The deleterious effect of peg announcements on fiscal discipline in emerging markets |
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| Institution: | 1. Centro de Salud de La Eria, Oviedo, Asturias, España;2. Centro de Salud Burgos Rural, Burgos, España;3. Área Básica de Salud Martorell Urbano, Martorell, Barcelona, España;4. Centro de Salud La Puebla de Montalbán, La Puebla de Montalbán, Toledo, España;5. Centro de Atención Primaria San Roque, Badajoz, España;6. Centro de Salud Ciudad Jardín, Málaga, España;7. Unidad Docente de Atención Familiar y Comunitaria de Guadalajara, Guadalajara, España;1. Servicio de Endocrinología y Nutrición, Hospital Universitario Virgen de la Victoria, Málaga, España;2. Servicio de Anatomía Patológica, Hospital Universitario Virgen de la Victoria, Málaga, España;3. Servicio de Radiología, Hospital Universitario Virgen de la Victoria, Málaga, España;4. Servicio de Endocrinología y Nutrición, Hospital General de Granollers, Barcelona, España;5. Servicio de Endocrinología y Nutrición, Hospital Universitario Son Espases, Palma de Mallorca, España |
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| Abstract: | This paper explores the impact of exchange rate pegs on the fiscal stance of emerging markets during the nineties. We empirically show that announcing the pegs had deleterious effects on fiscal discipline, while ‘de facto’ pegs which were not announced delivered superior fiscal outcomes. The evidence suggests that this was due to the initial positive credibility shock of the announcement, which allowed for easier and less costly access to the financing of fiscal deficits in emerging countries. |
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