ELECTIONS AND EXCHANGE RATE POLICY CYCLES

Marco Bonomo and Cristina Terra

Economics and Politics, 2005, vol. 17, issue 2, 151-176

Abstract: This paper presents a theoretical model based on the distributive effects of real exchange rate (RER) changes that generates RER electoral cycles of the type identified in Latin American countries: more appreciated RER before elections and more depreciated after elections. Typically, a RER depreciation favors exporters and import‐competing domestic industries, to the detriment of consumers. These RER cycles are generated by imperfect information on policy‐makers' preferences, which are concealed from voters with the help of an unstable macroeconomic environment. Exchange rate cycles result from the interplay between the electoral power of the non‐tradable sector and the tradable sector's ability to lobby the government.

Date: 2005
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https://doi.org/10.1111/j.1468-0343.2005.00150.x

Related works:
Working Paper: Elections and Exchange Rate Policy Cycles (2004)
Working Paper: Elections and exchange rate policy cycles (2001)
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Persistent link: https://EconPapers.repec.org/RePEc:bla:ecopol:v:17:y:2005:i:2:p:151-176

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