Losing Credibility: The Stabilization Blues

In exchange rate-based stabilization programs, credibility often follows a distinct time pattern. At first it rises as the highly visible nominal anchor provides a sense of stability and hopes run high for a permanent solution to the fiscal problems. Later, as the domestic currency appreciates in re...

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Bibliographic Details
Main Author: Guidotti, Pablo Emilio (Author)
Format: Electronic eBook
Language:English
Published: Washington, D.C International Monetary Fund 1992
Series:IMF Working Papers Working Paper No. 92/73
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Summary:In exchange rate-based stabilization programs, credibility often follows a distinct time pattern. At first it rises as the highly visible nominal anchor provides a sense of stability and hopes run high for a permanent solution to the fiscal problems. Later, as the domestic currency appreciates in real terms and the fiscal problems are not fully resolved, the credibility of the program falls, sometimes precipitously. This paper develops a political-economy model that focuses on the evolution of credibility over time, and is consistent with the pattern just described. Inflation inertia and costly budget negotiations play a key role in the model
Physical Description:1 Online-Ressource (44 p)
ISBN:1451958595
9781451958591

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