The Political Economy of Exchange Rate Regimes in Oil Countries

This paper examines factors influencing the choice of exchange rate regime in oil producing countries. Prevailing theories in selecting exchange rate regime include optimum currency area, political economy theory, and currency crisis. In this survey the matter has been studied regarding political economy theory. The variables used in the economic and political structure of the considered countries indicate that from 1974 to 2011 as many as 31 countries by using Panel Logit model have been studied. The result suggests the influence of political structure, oil rent, government ideology and economic capacity on specifying the exchange rate regime. Thus, the more democratic political structure, as well as the more leftist government ideology and also the wider economic capacity increase, the likelihood of choosing a flexible regime, If oil rent and dependence on oil revenue increase there will be a higher probability of implementing a fixed regime.