Elections and the Timing of Devaluations

27 Pages Posted: 21 Apr 2011

See all articles by Ernesto Stein

Ernesto Stein

Inter-American Development Bank (IDB)

Jorge M. Streb

Universidad del CEMA

Date Written: January 1999

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

Stein, Ernesto Hugo and Streb, Jorge Miguel, Elections and the Timing of Devaluations (January 1999). IDB Working Paper No. 328, Available at SSRN: https://ssrn.com/abstract=1817193 or http://dx.doi.org/10.2139/ssrn.1817193

Ernesto Hugo Stein (Contact Author)

Inter-American Development Bank (IDB) ( email )

1300 New York Avenue, NW
Research Department
Washington, DC 20577
United States

Jorge Miguel Streb

Universidad del CEMA ( email )

Av. Cordoba 374
Buenos Aires, CABA
Argentina

HOME PAGE: http://www.ucema.edu.ar/u/jms/

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