TY - JOUR
T1 - Hard currencies for hard times. Terror attacks and the choice of monetary anchors
AU - Sadeh, Tal
N1 - Funding Information: The author acknowledges the helpful suggestions of William Bernhard, Alex Cukierman, John Freeman, David Leblang, Leo Leiderman, Gerald Schneider, an anonymous referee, participants in a workshop on ‘Political Events, Financial Markets, and Trade’ held in Konstanz, Germany in January 2007, and participants in the 2007 Israel Economic Association Annual Meeting. The author also acknowledges the support of the Kurt Lion Foundation in organizing the workshop and a research grant from the Leonard Davis Institute for International Relations. The author is grateful to Amir Kazir and the Bank of Israel for granting him access to the Bank’s library. Nizan Feldman and Tsvika Machlof provided excellent research assistance.
PY - 2011/8
Y1 - 2011/8
N2 - As terror's victims increase, hard currency commitments gain effectiveness in reducing inflation, and central bank independence loses its effectiveness, because terror reduces transparency and the number of veto players in domestic politics. PCSE (Panel-Corrected Standard Error) estimations of inflation are run on pooled cross-section time-series sample of 87 countries from 1975-2005. When the trend level rises to 100 victims annually a currency board reduces inflation by up to 7.5%, and an independent bank raises inflation by up to 8%. When victims exceptionally exceed the trend by 100, a currency board reduces inflation by 2.5%, and an independent bank raises it by 2%.
AB - As terror's victims increase, hard currency commitments gain effectiveness in reducing inflation, and central bank independence loses its effectiveness, because terror reduces transparency and the number of veto players in domestic politics. PCSE (Panel-Corrected Standard Error) estimations of inflation are run on pooled cross-section time-series sample of 87 countries from 1975-2005. When the trend level rises to 100 victims annually a currency board reduces inflation by up to 7.5%, and an independent bank raises inflation by up to 8%. When victims exceptionally exceed the trend by 100, a currency board reduces inflation by 2.5%, and an independent bank raises it by 2%.
KW - Central banks
KW - Currency boards
KW - Terror
KW - Transparency
UR - http://www.scopus.com/inward/record.url?scp=80052834671&partnerID=8YFLogxK
U2 - https://doi.org/10.1080/10242694.2010.500817
DO - https://doi.org/10.1080/10242694.2010.500817
M3 - مقالة
SN - 1024-2694
VL - 22
SP - 367
EP - 392
JO - Defence and Peace Economics
JF - Defence and Peace Economics
IS - 4
ER -