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Stabilization Programs and External Enforcement: Experience From the 1920's

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  • Julio A. Santaella

Abstract

Credibility and financing problems are important reasons why countries may seek to involve external institutions in the design and implementation of stabilization programs. In particular, governments may rely on external institutions to ‘enforce’ programs that would otherwise lack credibility. This paper analyzes six European currency stabilizations sponsored by the League of Nations in the 1920s. It emphasizes the means by which the League provided a ‘commitment technology’ and enforced compliance, thereby helping to ensure successful stabilizations. Empirical evidence indicates that countries with greater credibility problems relied more heavily on external enforcement to stabilize their currencies.

Suggested Citation

  • Julio A. Santaella, 1993. "Stabilization Programs and External Enforcement: Experience From the 1920's," IMF Working Papers 1993/003, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:1993/003
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    Cited by:

    1. Giovanni B. Pittaluga & Elena Seghezza, 2012. "The role of Rentiers in the stabilization processes of the 1920s," European Review of Economic History, European Historical Economics Society, vol. 16(2), pages 188-210, May.
    2. Sebastian Edwards, 2007. "Establishing Credibility: The Role of Foreign Advisors in Chile's 1955-1958 Stabilization Program," NBER Chapters, in: The Decline of Latin American Economies: Growth, Institutions, and Crises, pages 291-332, National Bureau of Economic Research, Inc.
    3. Andreas Kakridis, 2021. "Nobody’s child: the Bank of Greece in the interwar years," Working Papers 290, Bank of Greece.
    4. Knight, Malcolm & Santaella, Julio A., 1997. "Economic determinants of IMF financial arrangements," Journal of Development Economics, Elsevier, vol. 54(2), pages 405-436, December.
    5. Singleton,John, 2010. "Central Banking in the Twentieth Century," Cambridge Books, Cambridge University Press, number 9780521899093, October.

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