IDEAS home Printed from https://ideas.repec.org/p/idb/wpaper/4164.html
   My bibliography  Save this paper

Elections and the Timing of Devaluations

Author

Listed:
  • Ernesto H. Stein
  • Jorge M. Streb

Abstract

This paper presents a rational political budget cycle model for an open economy, in which devaluations are delayed in the pre-election period so as to increase the electoral chances of the party in office. By concentrating on closed economies, previous political cycle models had overlooked the influence of elections on the behavior of exchange rates. Voter uncertainty is introduced in two different dimensions. Not only are voters uncertain regarding the competency of the incumbent, but tey also ignore the degree to which the incumbent is opportunistic.

Suggested Citation

  • Ernesto H. Stein & Jorge M. Streb, 1999. "Elections and the Timing of Devaluations," Research Department Publications 4164, Inter-American Development Bank, Research Department.
    • Handle: RePEc:idb:wpaper:4164
    as

    Download full text from publisher

    File URL: http://www.iadb.org/research/pub_hits.cfm?pub_id=WP-396&pub_file_name=pubWP-396.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. 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.
    2. Maurice Obstfeld & Kenneth S. Rogoff, 1996. "Foundations of International Macroeconomics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262150476, April.
    3. Reinhart, Carmen & Vegh, Carlos, 1994. "Inflation stabilization in chronic inflation countries: The empirical evidence," MPRA Paper 13689, University Library of Munich, Germany.
    4. Ben S. Bernanke & Julio J. Rotemberg (ed.), 1997. "NBER Macroeconomics Annual 1997," MIT Press Books, The MIT Press, edition 1, volume 1, number 026252242x, April.
    5. Thomas J. Sargent & Neil Wallace, 1984. "Some Unpleasant Monetarist Arithmetic," Palgrave Macmillan Books, in: Brian Griffiths & Geoffrey E. Wood (ed.), Monetarism in the United Kingdom, pages 15-41, Palgrave Macmillan.
    6. Yoram Ben‐Porath, 1975. "The Years Of Plenty And The Years Of Famine—A Political Business Cycle?," Kyklos, Wiley Blackwell, vol. 28(2), pages 400-403, January.
    7. 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 235-266, January.
    8. Jorge Miguel Streb, 2005. "Signaling in Political Budget Cycles: How Far Are You Willing to Go?," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 7(2), pages 229-252, May.
    9. Klein, Michael W. & Marion, Nancy P., 1997. "Explaining the duration of exchange-rate pegs," Journal of Development Economics, Elsevier, vol. 54(2), pages 387-404, December.
    10. Ernesto H. Stein & Jeffry Frieden, 2000. "The Political Economy of Exchange Rate Policy in Latin America: An Analytical Overview," Research Department Publications 3118, Inter-American Development Bank, Research Department.
    11. Eliana Cardoso, 1991. "From Inertia to Megainflation: Brazil in the 1980s," NBER Working Papers 3585, National Bureau of Economic Research, Inc.
    12. Kenneth Rogoff & Anne Sibert, 1988. "Elections and Macroeconomic Policy Cycles," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 55(1), pages 1-16.
    13. Barro, Robert J, 1979. "On the Determination of the Public Debt," Journal of Political Economy, University of Chicago Press, vol. 87(5), pages 940-971, October.
    14. Nicolini, Juan Pablo, 1998. "More on the time consistency of monetary policy," Journal of Monetary Economics, Elsevier, vol. 41(2), pages 333-350, April.
    15. Ernesto H. Stein & Jeffry Frieden & Piero Ghezzi, 2000. "Politics and Exchange Rates: A Cross-Country Approach to Latin America," Research Department Publications 3119, Inter-American Development Bank, Research Department.
    16. Baron, David P., 1994. "Electoral Competition with Informed and Uninformed Voters," American Political Science Review, Cambridge University Press, vol. 88(1), pages 33-47, March.
    17. Calvo, Guillermo A, 1986. "Temporary Stabilization: Predetermined Exchange Rates," Journal of Political Economy, University of Chicago Press, vol. 94(6), pages 1319-1329, December.
    18. Alberto Alesina & Nouriel Roubini & Gerald D. Cohen, 1997. "Political Cycles and the Macroeconomy," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262510944, April.
    19. Rogoff, Kenneth, 1990. "Equilibrium Political Budget Cycles," American Economic Review, American Economic Association, vol. 80(1), pages 21-36, March.
    20. Sebastian Edwards, 1993. "The Political Economy of Infaliton and Stabilization in Developing Countries," NBER Working Papers 4319, National Bureau of Economic Research, Inc.
    21. Ernesto H. Stein & Natalia Salazar & Roberto Steiner & Eugenio Díaz-Bonilla & Marco Bonomo & Juan C. Jaramillo & Hector E. Schamis & Alberto Pascó-Front & Piero Ghezzi & Maria Cristina Terra & José De, 2001. "The Currency Game: Exchange Rate Politics in Latin America," IDB Publications (Books), Inter-American Development Bank, number 77398 edited by Ernesto H. Stein & Jeffry Frieden, February.
    22. Juan P. Nicolini, 1993. "More on the time inconsistency of optimal monetary policy," Economics Working Papers 56, Department of Economics and Business, Universitat Pompeu Fabra.
    23. repec:idb:brikps:77398 is not listed on IDEAS
    24. Maurice Obstfeld & Kenneth Rogoff, 1995. "The Mirage of Fixed Exchange Rates," Journal of Economic Perspectives, American Economic Association, vol. 9(4), pages 73-96, Fall.
    25. Michael Gavin & Roberto Perotti, 1997. "Fiscal Policy in Latin America," NBER Chapters, in: NBER Macroeconomics Annual 1997, Volume 12, pages 11-72, National Bureau of Economic Research, Inc.
    26. William D. Nordhaus, 1975. "The Political Business Cycle," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 42(2), pages 169-190.
    27. Lucas, Robert E, Jr, 1980. "Equilibrium in a Pure Currency Economy," Economic Inquiry, Western Economic Association International, vol. 18(2), pages 203-220, April.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. 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.
    2. Stein, Ernesto H. & Streb, Jorge M., 2004. "Elections and the timing of devaluations," Journal of International Economics, Elsevier, vol. 63(1), pages 119-145, May.
    3. Ernesto H. Stein & Jorge M. Streb, 1999. "Las elecciones y el momento de las devaluaciones," Research Department Publications 4165, Inter-American Development Bank, Research Department.
    4. Ernesto H. Stein & Jeffry Frieden & Piero Ghezzi, 2000. "Politics and Exchange Rates: A Cross-Country Approach to Latin America," Research Department Publications 3119, Inter-American Development Bank, Research Department.
    5. Alesina, A. & Passalacqua, A., 2016. "The Political Economy of Government Debt," Handbook of Macroeconomics, in: J. B. Taylor & Harald Uhlig (ed.), Handbook of Macroeconomics, edition 1, volume 2, chapter 0, pages 2599-2651, Elsevier.
    6. Cermeño, Rodolfo & Grier, Robin & Grier, Kevin, 2010. "Elections, exchange rates and reform in Latin America," Journal of Development Economics, Elsevier, vol. 92(2), pages 166-174, July.
    7. Block, Steven A. & Vaaler, Paul M., 2004. "The price of democracy: sovereign risk ratings, bond spreads and political business cycles in developing countries," Journal of International Money and Finance, Elsevier, vol. 23(6), pages 917-946, October.
    8. 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.
    9. Jorge M. Streb & Daniel Lema & Gustavo Torrens, 2009. "Checks and Balances on Political Budget Cycles: Cross‐Country Evidence," Kyklos, Wiley Blackwell, vol. 62(3), pages 426-447, August.
    10. Marco Bonomo & Cristina Terra, 2005. "Elections And Exchange Rate Policy Cycles," Economics and Politics, Wiley Blackwell, vol. 17(2), pages 151-176, July.
    11. S. Brock Blomberg & Jeffry Frieden & Ernesto Stein, 2005. "Sustaining fixed rates: The political economy of currency pegs in Latin America," Journal of Applied Economics, Universidad del CEMA, vol. 8, pages 203-225, November.
    12. Akhmed Akhmedov & Ekaterina Zhuravskaya, 2004. "Opportunistic Political Cycles: Test in a Young Democracy Setting," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 119(4), pages 1301-1338.
    13. Jorge Streb & Gustavo Torrens, 2013. "Making rules credible: divided government and political budget cycles," Public Choice, Springer, vol. 156(3), pages 703-722, September.
    14. Fuest, Clemens & Gründler, Klaus & Potrafke, Niklas & Ruthardt, Fabian, 2024. "Read my lips? Taxes and elections," Journal of Public Economics, Elsevier, vol. 236(C).
    15. Block, Steven A., 2002. "Political business cycles, democratization, and economic reform: the case of Africa," Journal of Development Economics, Elsevier, vol. 67(1), pages 205-228, February.
    16. Eslava, Marcela, 2006. "The Political Economy of Fiscal Policy: Survey," IDB Publications (Working Papers) 3343, Inter-American Development Bank.
    17. Simon Berset & Martin Huber & Mark Schelker, 2023. "The fiscal response to revenue shocks," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 30(3), pages 814-848, June.
    18. Persson, Torsten & Tabellini, Guido, 1999. "Political economics and macroeconomic policy," Handbook of Macroeconomics, in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 22, pages 1397-1482, Elsevier.
    19. Sainan Huang & Cristina Terra, 2016. "Exchange Rate Populism," Economics and Politics, Wiley Blackwell, vol. 28(1), pages 105-132, March.
    20. Rebecca Hellerstein, 2007. "Is There a Dead Spot? New Evidence on FOMC Decisions Before Elections," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 39(6), pages 1411-1427, September.

    More about this item

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:idb:wpaper:4164. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Felipe Herrera Library (email available below). General contact details of provider: https://edirc.repec.org/data/iadbbus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.