Stabilization Programs and External Enforcement: Experience from the 1920s

48 Pages Posted: 15 Feb 2006

See all articles by Julio A. Santaella

Julio A. Santaella

Instituto Tecnológico Autónomo de México (ITAM)

Date Written: January 1993

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.

JEL Classification: E61, F33, N24

Suggested Citation

Santaella, Julio A., Stabilization Programs and External Enforcement: Experience from the 1920s (January 1993). IMF Working Paper No. 93/3, Available at SSRN: https://ssrn.com/abstract=883414

Julio A. Santaella (Contact Author)

Instituto Tecnológico Autónomo de México (ITAM) ( email )

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