A Model of Exchange Rate Crises with Partisan Governments
Posted: 28 Jun 2001
This paper investigates the consequences of elections on the capacity of governments to defend a fixed parity in the presence of output shocks. It demonstrates that the political uncertainty associated with elections may significantly modify the reactions of governments in a way that may be interpreted as opposite to their ideology. It also shows that the probability that a devaluation occurs increases significantly after an election.
JEL Classification: D78, E61, F33, F41
Suggested Citation: Suggested Citation