Political Uncertainty and the Peso Problem
AbstractThis paper analyses the relation between political uncertainty and the Peso Problem in emerging markets. Initially, it is assumed that the country has a hard peg system (the present government will never devalue). As for the political opposition, however, it is open to the possibility of leaving the fixed regime when it comes to power. Assuming that the change of government follows a Poisson distribution, our model shows that the expectations of a devaluation under the subsequent new government may drive up country risk premium under the first government. Sovereign spreads in Argentina in 2001 are used to illustrate the argument.
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 University Library of Munich, Germany in its series MPRA Paper with number 18246.
Date of creation: 2006
Date of revision:
Peso problem; political uncertainty;
Find related papers by JEL classification:
- F34 - International Economics - - International Finance - - - International Lending and Debt Problems
- F31 - International Economics - - International Finance - - - Foreign Exchange
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.:
- Roubini, Nouriel & Swagel, Phillip & Ozler, Sule & Alesina, Alberto, 1996.
"Political Instability and Economic Growth,"
4553024, Harvard University Department of Economics.
- Ozkan, F. Gulcin & Sutherland, Alan, 1998.
"A currency crisis model with an optimising policymaker,"
Journal of International Economics,
Elsevier, vol. 44(2), pages 339-364, April.
- Gulcin Ozkan & Alan Sutherland, . "A Currency Crisis Model with an Optimising Policymaker," Discussion Papers 96/11, Department of Economics, University of York.
- Alesina, Alberto, et al, 1996.
" Political Instability and Economic Growth,"
Journal of Economic Growth,
Springer, vol. 1(2), pages 189-211, June.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Ekkehart Schlicht).
If references are entirely missing, you can add them using this form.