The focus of this paper is on exchange rate regimes in of six West African countries that have formed the West African Monetary Zone (WAMZ); a policy domain whose heterogeneous influences are often overlooked. This thesis seeks to expand and develop knowledge on the political economy factors that influence the choice of exchange rate regimes with a special emphasis on interest group and political explanations. Building on a new and unique data set, an ordered logit model is employed to measure how business interests, political and economic variables increase the likelihood of a fixed or flexible currency regime choice. Evidence is found that business interests and political factors have indeed played a significantly more important role than economic considerations. In particular, economies with a stronger service sector tend to fix their exchange rates rather than allow them to float. Whereas right-wing governments are more prone to promote fixed exchange rates, left-wing governments favor flexible arrangements. In situations, in which civil unrest or other insurgencies occur, countries are more likely to abandon a peg for more flexible exchange rate systems. At the country level, some more distinct effects are detected. Although the empirical models include a vast number of potential predictors and run crosschecks through different specifications, the study does not argue the findings to be a result of direct causation but rather provide evidence for the underlying mechanisms in West Africa.
|Educations||MSc in International Business and Politics, (Graduate Programme) Final Thesis|
|Number of pages||86|
|Supervisors||Mogens Kamp Justesen|