Elections and the timing of devaluations

Autores
Stein, Ernesto Hugo; Streb, Jorge Miguel
Año de publicación
1998
Idioma
inglés
Tipo de recurso
artículo
Estado
versión publicada
Descripción
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.
Instituto de Investigaciones Económicas
Materia
Ciencias Económicas
elecciones
inflación
política monetaria
devaluación
Nivel de accesibilidad
acceso abierto
Condiciones de uso
http://creativecommons.org/licenses/by-nc-nd/3.0/
Repositorio
SEDICI (UNLP)
Institución
Universidad Nacional de La Plata
OAI Identificador
oai:sedici.unlp.edu.ar:10915/8844

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network_name_str SEDICI (UNLP)
spelling Elections and the timing of devaluationsStein, Ernesto HugoStreb, Jorge MiguelCiencias Económicaseleccionesinflaciónpolítica monetariadevaluaciónThis 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.Instituto de Investigaciones Económicas1998info:eu-repo/semantics/articleinfo:eu-repo/semantics/publishedVersionArticulohttp://purl.org/coar/resource_type/c_6501info:ar-repo/semantics/articuloapplication/pdf433-456http://sedici.unlp.edu.ar/handle/10915/8844enginfo:eu-repo/semantics/altIdentifier/issn/0013-0419info:eu-repo/semantics/openAccesshttp://creativecommons.org/licenses/by-nc-nd/3.0/Creative Commons Attribution-NonCommercial-NoDerivs 3.0 Unported (CC BY-NC-ND 3.0)reponame:SEDICI (UNLP)instname:Universidad Nacional de La Platainstacron:UNLP2025-09-29T10:50:29Zoai:sedici.unlp.edu.ar:10915/8844Institucionalhttp://sedici.unlp.edu.ar/Universidad públicaNo correspondehttp://sedici.unlp.edu.ar/oai/snrdalira@sedici.unlp.edu.arArgentinaNo correspondeNo correspondeNo correspondeopendoar:13292025-09-29 10:50:29.933SEDICI (UNLP) - Universidad Nacional de La Platafalse
dc.title.none.fl_str_mv Elections and the timing of devaluations
title Elections and the timing of devaluations
spellingShingle Elections and the timing of devaluations
Stein, Ernesto Hugo
Ciencias Económicas
elecciones
inflación
política monetaria
devaluación
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
dc.creator.none.fl_str_mv Stein, Ernesto Hugo
Streb, Jorge Miguel
author Stein, Ernesto Hugo
author_facet Stein, Ernesto Hugo
Streb, Jorge Miguel
author_role author
author2 Streb, Jorge Miguel
author2_role author
dc.subject.none.fl_str_mv Ciencias Económicas
elecciones
inflación
política monetaria
devaluación
topic Ciencias Económicas
elecciones
inflación
política monetaria
devaluación
dc.description.none.fl_txt_mv 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.
Instituto de Investigaciones Económicas
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.
publishDate 1998
dc.date.none.fl_str_mv 1998
dc.type.none.fl_str_mv info:eu-repo/semantics/article
info:eu-repo/semantics/publishedVersion
Articulo
http://purl.org/coar/resource_type/c_6501
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status_str publishedVersion
dc.identifier.none.fl_str_mv http://sedici.unlp.edu.ar/handle/10915/8844
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dc.language.none.fl_str_mv eng
language eng
dc.relation.none.fl_str_mv info:eu-repo/semantics/altIdentifier/issn/0013-0419
dc.rights.none.fl_str_mv info:eu-repo/semantics/openAccess
http://creativecommons.org/licenses/by-nc-nd/3.0/
Creative Commons Attribution-NonCommercial-NoDerivs 3.0 Unported (CC BY-NC-ND 3.0)
eu_rights_str_mv openAccess
rights_invalid_str_mv http://creativecommons.org/licenses/by-nc-nd/3.0/
Creative Commons Attribution-NonCommercial-NoDerivs 3.0 Unported (CC BY-NC-ND 3.0)
dc.format.none.fl_str_mv application/pdf
433-456
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