The Politics of Exchange Rates in Developing Countries: Political Cycles and Domestic Institutions

1. 1 The context What factors determine a country's exchange rate regime? Since the col­ lapse of the Bretton Woods system of fixed exchange rates in 1973, eco­ nomists have been increasingly interested in answering this question. Ana­ lysts focused primarily on the possible influence of optimum currency area (OCA) criteria, such as a country's size, openness to trade, or factor mobi­ lity. More recent approaches emphasized the nature and the sources of shocks to which an economy is exposed...