Money-Based Versus Exchange-Rate-Based Stabilization: Is there Space for Political Opportunism?

In response to high and chronic inflation, countries have adopted different stabilization policies. However, the extent to which these stabilization programs were designed for political motives is not clear. Since exchange-rate-based stabilizations (ERBS) create an initial consumption boom followed...

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Bibliographic Details
Main Author: Aisen, Ari (Author)
Format: Electronic eBook
Language:English
Published: Washington, D.C International Monetary Fund 2004
Series:IMF Working Papers Working Paper No. 04/94
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Summary:In response to high and chronic inflation, countries have adopted different stabilization policies. However, the extent to which these stabilization programs were designed for political motives is not clear. Since exchange-rate-based stabilizations (ERBS) create an initial consumption boom followed by a contraction, whereas money-based stabilizations (MBS) generate a consumption bust followed by a recovery, policymakers may consider the timing of elections when determining the nominal anchor for stabilization. This paper finds strong evidence that the choice of nominal anchor depends on elections, implying the existence of political opportunism. ERBS are, on average, launched before elections while MBS are set after them
Physical Description:1 Online-Ressource (35 p)
ISBN:1451851758
9781451851755

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