Elections and the timing of devaluations

This paper follows the rational political budget cycle approach, ,extending it in two directions. First, it considers an open economy, to formalize the implications of political budget cycles for nominal exchange rates. The variable used as a signal of competency is the rate of devaluation which, in...

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Detalles Bibliográficos
Autores principales: Stein, Ernesto Hugo, Streb, Jorge Miguel
Formato: Articulo
Lenguaje:Inglés
Publicado: 1998
Materias:
Ciencias Económicas
elecciones
inflación
política monetaria
devaluación
Acceso en línea:http://sedici.unlp.edu.ar/handle/10915/8844
Aporte de:
SEDICI (UNLP) de Universidad Nacional de La Plata
id I19-R120-10915-8844
record_format dspace
institution Universidad Nacional de La Plata
institution_str I-19
repository_str R-120
collection SEDICI (UNLP)
language Inglés
topic Ciencias Económicas
elecciones
inflación
política monetaria
devaluación
spellingShingle Ciencias Económicas
elecciones
inflación
política monetaria
devaluación
Stein, Ernesto Hugo
Streb, Jorge Miguel
Elections and the timing of devaluations
topic_facet Ciencias Económicas
elecciones
inflación
política monetaria
devaluación
description This paper follows the rational political budget cycle approach, ,extending it in two directions. First, it considers an open economy, to formalize the implications of political budget cycles for nominal exchange rates. The variable used as a signal of competency is the rate of devaluation which, in the context of the one-sector model we use, coincides with the rate of inflation, and acts as a tax on consumption. The relevant trade-off is between devaluation today and tomorrow, as in the Sagent-Wallace unpleasant monetarist arithmetic. Hence, the pattern of devaluations around elections are part of a political budget cycle, a feature that has been overlooked in conventional stories of political budget cycles that concentrate on a closed economy. The second extension is more fundamental, and applies to political budget cycles in open and closed economies. The typical assumption in this class of models is that governments share the utility function of voters, but derive additional utility from being in office (which may lead to opportunistic behavior). The only informational asymmetry regards the degree of competence of the government. We introduce a second dimension over which there is incomplete information: the degree to which the government is self-motivated. Voters do not know whether the incumbent is opportunistic or not. This simple assumption turns out to have important implications.
format Articulo
Articulo
author Stein, Ernesto Hugo
Streb, Jorge Miguel
author_facet Stein, Ernesto Hugo
Streb, Jorge Miguel
author_sort Stein, Ernesto Hugo
title Elections and the timing of devaluations
title_short Elections and the timing of devaluations
title_full Elections and the timing of devaluations
title_fullStr Elections and the timing of devaluations
title_full_unstemmed Elections and the timing of devaluations
title_sort elections and the timing of devaluations
publishDate 1998
url http://sedici.unlp.edu.ar/handle/10915/8844
work_keys_str_mv AT steinernestohugo electionsandthetimingofdevaluations
AT strebjorgemiguel electionsandthetimingofdevaluations
bdutipo_str Repositorios
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