Money-Based Versus Exchange-Rate-Based Stabilization
AbstractIn response to high and chronic inflation, countries have adopted different stabilization policies. However, the extent to which these stabilization programs were designed for political motives is not clear. Since exchange-rate-based stabilizations (ERBS) create an initial consumption boom followed by a contraction, whereas money-based stabilizations (MBS) generate a consumption bust followed by a recovery, policymakers may consider the timing of elections when determining the nominal anchor for stabilization. This paper finds strong evidence that the choice of nominal anchor depends on elections, implying the existence of political opportunism. ERBS are, on average, launched before elections while MBS are set after them.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. 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.
Bibliographic InfoPaper provided by International Monetary Fund in its series IMF Working Papers with number 04/94.
Date of creation: 01 Jun 2004
Date of revision:
Contact details of provider:
Postal: International Monetary Fund, Washington, DC USA
Phone: (202) 623-7000
Fax: (202) 623-4661
Web page: http://www.imf.org/external/pubind.htm
More information through EDIRC
This paper has been announced in the following NEP Reports:
- NEP-ALL-2005-10-23 (All new papers)
- NEP-CBA-2005-11-14 (Central Banking)
- NEP-MAC-2005-10-24 (Macroeconomics)
- NEP-MON-2005-10-24 (Monetary Economics)
- NEP-POL-2005-10-25 (Positive Political Economics)
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.:
- Ray C. Fair, 1976.
"The Effects of Economic Events on Votes for President,"
Cowles Foundation Discussion Papers
418, Cowles Foundation for Research in Economics, Yale University.
- Fair, Ray C, 1978. "The Effect of Economic Events on Votes for President," The Review of Economics and Statistics, MIT Press, vol. 60(2), pages 159-73, May.
- Nordhaus, William D, 1975. "The Political Business Cycle," Review of Economic Studies, Wiley Blackwell, vol. 42(2), pages 169-90, April.
- Rogoff, Kenneth, 1990.
"Equilibrium Political Budget Cycles,"
American Economic Review,
American Economic Association, vol. 80(1), pages 21-36, March.
- Okun, Arthur M, 1978. "Efficient Disinflationary Policies," American Economic Review, American Economic Association, vol. 68(2), pages 348-52, May.
- Ernesto H. Stein & Jorge M. Streb, 1997.
"Political Stabilization Cycles in High Inflation Economies,"
CEMA Working Papers: Serie Documentos de Trabajo.
123, Universidad del CEMA.
- 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.
- Ernesto Stein and Jorge Streb., 1994. "Political Stabilization Cycles in High Inflation Economies," Center for International and Development Economics Research (CIDER) Working Papers C94-039, University of California at Berkeley.
- Ernesto H. Stein & Jorge M. Streb, 1995. "Political Stabilization Cycles in High Inflation Economies," IDB Publications 6857, Inter-American Development Bank.
- Federico Echenique & Alvaro Forteza, 1997.
"Are Stabilization Programs Expansionary?,"
Documentos de Trabajo (working papers)
0497, Department of Economics - dECON.
- Jose Veiga, Francisco, 1999. "What causes the failure of inflation stabilization plans?," Journal of International Money and Finance, Elsevier, vol. 18(2), pages 169-194, February.
- Beck, Thorsten & Clarke, George & Groff, Alberto & Keefer, Philip & Walsh, Patrick, 2000. "New tools and new tests in comparative political economy - the database of political institutions," Policy Research Working Paper Series 2283, The World Bank.
- 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.
- Ernesto H. Stein & Jorge M. Streb & Piero Ghezzi, 2005.
"Real Exchange Rate Cycles Around Elections,"
Economics and Politics,
Wiley Blackwell, vol. 17(3), pages 297-330, November.
- repec:fth:repuec:2/97 is not listed on IDEAS
- Marco Antonio Cesar Bonomo & Maria Cristina Trindade Terra, 1999. "The Political Economy of Exchange Rate Policy in Brazil: an Empirical Assessment," Revista Brasileira de Economia, FGV/EPGE Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil), vol. 53(4), pages 411-432, October.
- Calvo, Guillermo A. & Vegh, Carlos A., 1999.
"Inflation stabilization and bop crises in developing countries,"
Handbook of Macroeconomics,
in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 24, pages 1531-1614
- 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.
- A. Javier Hamann, 1999. "Exchange-Rate-Based Stabilization," IMF Working Papers 99/132, International Monetary Fund.
- Luisa Lambertini, 2003. "Are Budget Deficits Used Strategically?," Boston College Working Papers in Economics 578, Boston College Department of Economics.
- Jeffry Frieden & David Leblang & Neven Valev, 2010. "The political economy of exchange rate regimes in transition economies," The Review of International Organizations, Springer, vol. 5(1), pages 1-25, March.
- Selim Elekdag, 2006. "How Does the Global Economic Environment Influence the Demand for IMF Resources," IMF Working Papers 06/239, International Monetary Fund.
- Irineu De Carvalho Filho & Marcos Chamon, 2008. "A Micro-Empirical Foundation for the Political Economy of Exchange Rate Populism," IMF Staff Papers, Palgrave Macmillan, vol. 55(3), pages 481-510, July.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Jim Beardow) or (Hassan Zaidi).
If references are entirely missing, you can add them using this form.