76 International Organization ment limits their policy discretion,potentially hurting their ability to retain office, politicians in a majoritarian system will prefer to let the currency float. In contrast,elections in proportional representation systems usually do not result in single-party majority governments.Instead,bargaining between parties deter- mines the composition of the government.Consequently,a party may lose a few votes in an election but retain the possibility of participating in the government. Since small vote swings do not necessarily have dramatic consequences for the com- position of the government,politicians in these systems may be less reticent to relin- quish discretionary control over monetary policy by fixing the exchange rate.More- over,a fixed exchange rate might actually help in coalition bargaining by providing a focal point for parties with diverse interests over monetary and economic policy.A pegged exchange rate is a "transparent"policy rule-that is,it can be observed at any time and is not subject to the long lags inherent in obtaining inflation and money supply data from the government.18 Parties in a coalition government might agree on a fixed exchange-rate focal point simply as a way to settle conflicts about policy. Additionally,a fixed exchange rate allows parties in the coalition government to monitor the policy activities of the party that holds the ministry of finance.19 In proportional representation systems where coalition or minority governments are common,therefore,politicians are more likely to fix their exchange rate. Second,the costs of serving in the opposition affect the incentives of the govern- ing party(ies)over the exchange-rate regime.In some systems opposition parties are excluded from the legislative policy process.Legislative committees may lack the resources to formulate policy or oversee the policy implementation.20 The governing party(ies)may also dominate committee membership or leadership positions,limit- ing the possibility of challenges to the government.21 Finally,the government may possess strict control over the legislative agenda,preventing committees from bring- ing issues to the legislative floor.In these systems,opposition legislators lack the ability to influence policy or to distribute particularistic policies to their constituents Politicians in the governing party(ies),therefore,have strong incentives not to risk their position in office.Consequently,they will not want to limit their policy discre- tion with a fixed exchange-rate arrangement. In other systems opposition parties play a larger role in the policy process.Legis- lative committee membership and leadership positions,rather than being dominated by the governing party(ies),are distributed across parties in proportion to their strength 18.See Aghevli,Khan,and Montiel 1991:and Bernhard 1997. 19.Parties in a coalition government bargain over both policy and the distribution of cabinet portfolios. See Laver and Schofield 1990;and Laver and Shepsle 1996.Although constrained by the coalition agree- ment,the party that controls the ministry of finance possesses institutional and informational advantages in the development and implementation of macroeconomic policy-advantages that the party could ex- ploit to enhance its own fortunes at the expense of its coalition partners.Bernhard 1998.A fixed exchange- rate commitment can help limit this potential for abuse by providing coalition partners with a clear stan- dard to monitor and evaluate the macroeconomic policy choices made by the party holding the finance portfolio. 20.See Krehbiel 1991;and Lupia and McCubbins 1994. 21.Strom 1990a.76 International Organization ment limits their policy discretion, potentially hurting their ability to retain office, politicians in a majoritarian system will prefer to let the currency float. In contrast, elections in proportional representation systems usually do not result in single-party majority governments. Instead, bargaining between parties deter￾mines the composition of the government. Consequently, a party may lose a few votes in an election but retain the possibility of participating in the government. Since small vote swings do not necessarily have dramatic consequences for the com￾position of the government, politicians in these systems may be less reticent to relin￾quish discretionary control over monetary policy by fixing the exchange rate. More￾over, a fixed exchange rate might actually help in coalition bargaining by providing a focal point for parties with diverse interests over monetary and economic policy. A pegged exchange rate is a "transparent" policy rule-that is, it can be observed at any time and is not subject to the long lags inherent in obtaining inflation and money supply data from the government.18 Parties in a coalition government might agree on a fixed exchange-rate focal point simply as a way to settle conflicts about policy. Additionally, a fixed exchange rate allows parties in the coalition government to monitor the policy activities of the party that holds the ministry of finance.19 In proportional representation systems where coalition or minority governments are common, therefore, politicians are more likely to fix their exchange rate. Second, the costs of serving in the opposition affect the incentives of the govern￾ing party(ies) over the exchange-rate regime. In some systems opposition parties are excluded from the legislative policy process. Legislative committees may lack the resources to formulate policy or oversee the policy implementati~n.~~ The governing party(ies) may also dominate committee membership or leadership positions, limit￾ing the possibility of challenges to the go~ernment.~~ Finally, the government may possess strict control over the legislative agenda, preventing committees from bring￾ing issues to the legislative floor. In these systems, opposition legislators lack the ability to influence policy or to distribute particularistic policies to their constituents. Politicians in the governing party(ies), therefore, have strong incentives not to risk their position in office. Consequently, they will not want to limit their policy discre￾tion with a fixed exchange-rate arrangement. In other systems opposition parties play a larger role in the policy process. Legis￾lative committee membership and leadership positions, rather than being dominated by the governing party(ies), are distributed across parties in proportion to their strength 18. See Aghevli, Khan, and Montiel 1991; and Bemhard 1997. 19. Parties in a coalition government bargain over both policy and the distribution of cabinet portfolios. See Laver and Schofield 1990; and Laver and Shepsle 1996. Although constrained by the coalition agree￾ment, the party that controls the ministry of finance possesses institutional and informational advantages in the development and implementation of macroeconomic policy-advantages that the party could ex￾ploit to enhance its own fortunes at the expense of its coalition partners. Bemhard 1998. A fixed exchange￾rate commitment can help limit this potential for abuse by providing coalition partners with a clear stan￾dard to monitor and evaluate the macroeconomic policy choices made by the party holding the finance portfolio. 20. See Krehbiel 1991; and Lupia and McCubbins 1994. 21. Strom 1990a