This concluding chapter reviews the evidence provided in chapters 2 through 5. The evidence confirms that preferences for undervalued exchange rates are context-dependent, and that powerful interest groups influence decisions about exchange rate policy. Together, these two pieces of evidence indicate that undervalued exchange rates are rare at least in part because they fail to receive solid support from powerful interest groups. The chapter suggests that the scholarly literature on political economy would benefit from reconceptualizing the relationship between interests and institutions, and paying more attention to how contextual factors shape preferences. It also discusses a key policy implication of the findings: the potential for certain types of institutional reforms to contribute to better exchange rate policies.
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