This file is part of IDEAS, which uses RePEc data


[ Papers | Articles | Software | Books | Chapters | Authors | Institutions | JEL Classification | NEP reports | Search | New papers by email | Author registration | Rankings | Volunteers | FAQ | Blog | Help! ]

Real exchange rate cycles around elections

Author info | Abstract | Publisher info | Download info | Related research | Statistics
Author Info
Piero Ghezzi
Ernesto Stein
Jorge M. Streb

Additional information is available for the following registered author(s):

Abstract

We develop the implications of political budget cycles for real exchange rates in a two-sector small open economy with a cash-in-advance constraint. Policy makers are office motivated politicians. Voters have incomplete information on the competence and the opportunism of incumbents. Devaluation acts like a tax, and is politically costly because it can signal the government is incompetent. This provides incumbents an incentive to postpone a devaluation, and can lead to an overvalued exchange rate before elections. We compare the implied cycle of appreciated/depreciated exchange rates to empirical evidence around elections from Latin America.

Download Info
To download:

If you experience problems downloading a file, check if you have the proper application to view it first. Information about this may be contained in the File-Format links below. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.cema.edu.ar/publicaciones/download/documentos/174.pdf
File Format: application/pdf
File Function:
Download Restriction: no

Publisher Info
Paper provided by Universidad del CEMA in its series CEMA Working Papers: Serie Documentos de Trabajo. with number 174.

Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Length:
Date of creation: Aug 2000
Date of revision:
Handle: RePEc:cem:doctra:174

Contact details of provider:
Postal: Av. C�rdoba 374, (C1054AAP) Capital Federal
Phone: (5411) 6314-3000
Fax: (5411) 4314-1654
Email:
Web page: http://www.cema.edu.ar/publicaciones/doc_trabajo.html
More information through EDIRC

For technical questions regarding this item, or to correct its listing, contact: (Valeria Dowding).

Related research
Keywords: exchange rate overvaluation; seigniorage; political budget cycle; asymmetric information.;

Other versions of this item:

Find related papers by JEL classification:
E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Models of Political Processes: Rent-seeking, Elections, Legislatures, and Voting Behavior

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

  1. Kenneth Rogoff, 1990. "Equilibrium Political Budget Cycles," NBER Working Papers 2428, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  2. Nordhaus, William D, 1975. "The Political Business Cycle," Review of Economic Studies, Blackwell Publishing, vol. 42(2), pages 169-90, April. [Downloadable!] (restricted)
  3. Guillermo A. Calvo & Carlos A. Vegh, 1999. "Inflation Stabilization and BOP Crises in Developing Countries," NBER Working Papers 6925, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  4. Torsten Persson & Guido Tabellini, 1997. "Political Economics and Macroeconomic Policy," NBER Working Papers 6329, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  5. Ilan Goldfajn & Rodrigo O. ValdŽs, 1999. "The Aftermath Of Appreciations," The Quarterly Journal of Economics, MIT Press, vol. 114(1), pages 229-262, February. [Downloadable!] (restricted)
  6. Ernesto H. Stein & Jeffry Frieden, 2000. "The Political Economy of Exchange Rate Policy in Latin America: An Analytical Overview," RES Working Papers 3118, Inter-American Development Bank, Research Department. [Downloadable!]
  7. Nicolini, Juan Pablo, 1998. "More on the time consistency of monetary policy," Journal of Monetary Economics, Elsevier, vol. 41(2), pages 333-350, April. [Downloadable!] (restricted)
  8. Marco Bonomo & Cristina Terra, 2005. "Elections And Exchange Rate Policy Cycles," Economics and Politics, Blackwell Publishing, vol. 17, pages 151-176, 07. [Downloadable!] (restricted)
    Other versions:
  9. Michael W. Klein & Nancy P. Marion, 1994. "Explaining the Duration of Exchange-Rate Pegs," NBER Working Papers 4651, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  10. Calvo, Guillermo A, 1986. "Temporary Stabilization: Predetermined Exchange Rates," Journal of Political Economy, University of Chicago Press, vol. 94(6), pages 1319-29, December. [Downloadable!] (restricted)
  11. Edwards, Sebastian, 1994. "The Political Economy of Inflation and Stabilization in Developing Countries," Economic Development and Cultural Change, University of Chicago Press, vol. 42(2), pages 235-66, January.
  12. Mussa, Michael, 1986. "Nominal exchange rate regimes and the behavior of real exchange rates: Evidence and implications," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 25(1), pages 117-214, January. [Downloadable!] (restricted)
  13. Rogoff, Kenneth & Sibert, Anne, 1988. "Elections and Macroeconomic Policy Cycles," Review of Economic Studies, Blackwell Publishing, vol. 55(1), pages 1-16, January. [Downloadable!] (restricted)
    Other versions:
  14. Ernesto H. Stein & Jorge M. Streb, 1999. "Elections and the Timing of Devaluations," CEMA Working Papers: Serie Documentos de Trabajo. 140, Universidad del CEMA. [Downloadable!]
    Other versions:
  15. Barro, Robert J, 1979. "On the Determination of the Public Debt," Journal of Political Economy, University of Chicago Press, vol. 87(5), pages 940-71, October. [Downloadable!] (restricted)
  16. Thomas J. Sargent & Neil Wallace, 1981. "Some unpleasant monetarist arithmetic," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Fall. [Downloadable!]
  17. Stein, Ernesto H. & Streb, Jorge M., 1998. "Political stabilization cycles in high-inflation economies," Journal of Development Economics, Elsevier, vol. 56(1), pages 159-180, June. [Downloadable!] (restricted)
    Other versions:
  18. Alesina, Alberto & Tabellini, Guido, 1988. "Credibility and politics," European Economic Review, Elsevier, vol. 32(2-3), pages 542-550, March. [Downloadable!] (restricted)
  19. Laura Alfaro, 1999. "Why governments implement Temporary Stabilization Programs," Journal of Applied Economics, Universidad del CEMA, vol. 0, pages 211-245, November. [Downloadable!]
Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Bonomo, Marco Antônio Cesar & Terra, Maria Cristina T., 2005. "Special Interests and Political Business Cycles," Economics Working Papers (Ensaios Economicos da EPGE) 597, Graduate School of Economics, Getulio Vargas Foundation (Brazil). [Downloadable!]
  2. Diego Aboal & Fernando Lorenzo & Andrés Rius, 2000. "Is the exchange rate politically manipulated around elections? The evidence from Uruguay," Documentos de Trabajo (working papers) 1800, Department of Economics - dECON. [Downloadable!]
  3. Vladimir Klyuev, 2003. "The Distributional Consequences of Real Exchange Rate Adjustment," IMF Working Papers 03/133, International Monetary Fund. [Downloadable!]
  4. Ari Aisen, 2004. "Money-Based Versus Exchange-Rate-Based Stabilization: Is There Space for Political Opportunism?," IMF Working Papers 04/94, International Monetary Fund. [Downloadable!]
  5. Marco Bonomo & Cristina Terra, 2008. "Political Business Cycles through Lobbying," THEMA Working Papers 2008-18, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise. [Downloadable!]
  6. Joel Sebastián Schneider, 2004. "El rol de los gobernadores opositores en las elecciones presidenciales," CEMA Working Papers: Serie Documentos de Trabajo. 281, Universidad del CEMA. [Downloadable!]
  7. Bonomo, Marco Antônio Cesar & Terra, Maria Cristina T., 2001. "Elections and Exchange Rate Policy Cycles," Economics Working Papers (Ensaios Economicos da EPGE) 435, Graduate School of Economics, Getulio Vargas Foundation (Brazil). [Downloadable!]
    Other versions:
Statistics
Access and download statistics

Did you know? RePEc stands for Research Papers in Economics.

This page was last updated on 2009-11-30.


This information is provided to you by IDEAS at the Department of Economics, College of Liberal Arts and Sciences, University of Connecticut using RePEc data on a server sponsored by the Society for Economic Dynamics.