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Title: The Politics of Surprise Devaluations: Modelling Motives for Giving Up a Peg
Author(s): Bohn, F.
Publication year: 2013
Source: Jahrbuecher Fuer Nationaloekonomie und Statistik, vol. 5+6, iss. 233, (2013), pp. 562-574
Number of Pages: 13 p.
ISSN: 0021-4027
DOI: https://doi.org/10.1515/jbnst-2013-5-602
Publication type: Article / Letter to editor

Please use this identifier to cite or link to this item : https://hdl.handle.net/2066/116932   https://hdl.handle.net/2066/116932

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Subject: Distributional Conflicts in a Globalizing World: Consequences for State-Market-Civil Society Arrangements
Organization: Internationale economie
Journal title:
Jahrbuecher Fuer Nationaloekonomie und Statistik
Volume: vol. 5+6
Issue: iss. 233
Page start: p. 562
Page end: p. 574
Abstract:
Planned ‘‘surprise’’ devaluations are often spurred by non-economic circumstances: a rentseeking government; political instability; or the opportunity to put the blame on a predecessor government. In this paper, these aspects are incorporated in the monetary and fiscal policy framework first suggested by Alesina and Tabellini (1987). It is shown that reneging on a fixed exchange rate promise unambiguously produces short term benefits, but long run losses. This leads to a non-straightforward trade-off between greediness (propensity for expropriation) and political stability (which implies a low time preference). The findings are empirically relevant and theoretically robust to extensions.
Languages used: English (eng)

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