Elections and Exchange Rate Policy Cycles
AbstractThis paper presents a theoretical model based on the distributive effects of RER changes that generates RER electoral cycles of the type identified in Latin American countries: more appreciated RER before elections and more depreciated after elections. Typically, a RER depreciation favors exporters and import competing domestic industries, to the detriment of consumers. These RER cycles are generated by imperfect information on policymakers' preferences, which are concealed from voters with the help of an unstable macroeconomic environment. Exchange rate cycles result from the interplay between the electoral power of the nontradable sector and the tradable sector's ability to lobby the government.
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Bibliographic InfoPaper provided by EconWPA in its series International Finance with number 0402001.
Date of creation: 05 Feb 2004
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RER cycle; electoral cycle; distributive conflict;
Other versions of this item:
- Bonomo, Marco Antônio Cesar & Terra, Maria Cristina T., 2001. "Elections and Exchange Rate Policy Cycles," Economics Working Papers (Ensaios Economicos da EPGE) 435, FGV/EPGE Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil).
- D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
- E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
- F31 - International Economics - - International Finance - - - Foreign Exchange
This paper has been announced in the following NEP Reports:
- NEP-ALL-2004-02-08 (All new papers)
- NEP-CDM-2004-02-08 (Collective Decision-Making)
- NEP-IFN-2004-02-08 (International Finance)
- NEP-POL-2004-02-08 (Positive Political Economics)
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