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A Micro-Empirical Foundation for the Political Economy of Exchange Rate Populism

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  • Irineu De Carvalho Filho
  • Marcos Chamon

Abstract

Latin American countries have experienced cycles of expansionary policies, currency appreciation, and crises. The popularity of appreciations, through their effect on consumers' purchasing power, has been an accepted assumption in the literature despite a dearth of studies on the distributional impact of exchange rate movements. This study computes the welfare effects of exchange rate movements at different points of the income distribution for Brazil and Mexico. It shows that the distributional effects of appreciations split both countries on a regional basis, instead of across income levels. In Brazil, appreciations are found to benefit less or harm more the rural areas; in Mexico, they benefit less or harm more the Northern border states. IMF Staff Papers (2008) 55, 481–510. doi:10.1057/imfsp.2008.15; published online 1 July 2008

Suggested Citation

  • 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.
  • Handle: RePEc:pal:imfstp:v:55:y:2008:i:3:p:481-510
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    References listed on IDEAS

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    6. Ca' Zorzi, Michele & Hahn, Elke & Sánchez, Marcelo, 2007. "Exchange rate pass-through in emerging markets," Working Paper Series 739, European Central Bank.
    7. Irineu E de Carvalho Filho & Marcos d Chamon, 2006. "The Myth of Post-Reform Income Stagnation in Brazil," IMF Working Papers 06/275, International Monetary Fund.
    8. Porto, Guido G., 2006. "Using survey data to assess the distributional effects of trade policy," Journal of International Economics, Elsevier, vol. 70(1), pages 140-160, September.
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    Cited by:

    1. Filho, Irineu de Carvalho & Chamon, Marcos, 2012. "The myth of post-reform income stagnation: Evidence from Brazil and Mexico," Journal of Development Economics, Elsevier, vol. 97(2), pages 368-386.
    2. Javier Cravino & Andrei A. Levchenko, 2017. "The Distributional Consequences of Large Devaluations," American Economic Review, American Economic Association, vol. 107(11), pages 3477-3509, November.
    3. Naotaka Sugawara, 2012. "Fiscal adjustment in Greece under the financial rescue programme: the distributional effects on Greek households," Applied Economics Letters, Taylor & Francis Journals, vol. 19(11), pages 1071-1074, July.

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