Joseph E. Stiglitz, José Antonio Ocampo, Shari Spiegel, Ricardo Ffrench-Davis, and Deepak Nayyar
- Published in print:
- 2006
- Published Online:
- September 2006
- ISBN:
- 9780199288144
- eISBN:
- 9780191603884
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/0199288143.003.0006
- Subject:
- Economics and Finance, Development, Growth, and Environmental
This chapter extends the analysis of the previous chapter to an open economy by introducing exchange rate policy; analyzing the complex relationships between exchange rate, fiscal, and monetary ...
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This chapter extends the analysis of the previous chapter to an open economy by introducing exchange rate policy; analyzing the complex relationships between exchange rate, fiscal, and monetary policies; and examining the ways in which capital flows complicate traditional analyses. Despite the greater complexities associated with open economy macroeconomics, the policy conclusions for a closed economy remain remarkably unaffected. While Keynesians and heterodox economists believe that government should actively intervene, conservatives remain skeptical about the desirability of such interventions. The objective of this chapter is to shed some light on how economists can come to such diverse views on economic policy. The first section examines the macroeconomic effects of exchange rates on employment, trade, inflation, aggregate demand, growth, and balance sheets. The second section examines the complex interactions between fiscal, monetary, and exchange rate policies in open economies with either fixed or flexible exchange rate regimes. This section also examines the effects of interest rates and exchange rates on capital flows in both crisis and non-crisis situations.Less
This chapter extends the analysis of the previous chapter to an open economy by introducing exchange rate policy; analyzing the complex relationships between exchange rate, fiscal, and monetary policies; and examining the ways in which capital flows complicate traditional analyses. Despite the greater complexities associated with open economy macroeconomics, the policy conclusions for a closed economy remain remarkably unaffected. While Keynesians and heterodox economists believe that government should actively intervene, conservatives remain skeptical about the desirability of such interventions. The objective of this chapter is to shed some light on how economists can come to such diverse views on economic policy. The first section examines the macroeconomic effects of exchange rates on employment, trade, inflation, aggregate demand, growth, and balance sheets. The second section examines the complex interactions between fiscal, monetary, and exchange rate policies in open economies with either fixed or flexible exchange rate regimes. This section also examines the effects of interest rates and exchange rates on capital flows in both crisis and non-crisis situations.
David R. Cameron
- Published in print:
- 1998
- Published Online:
- April 2004
- ISBN:
- 9780198294641
- eISBN:
- 9780191601071
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/0198294646.003.0007
- Subject:
- Political Science, European Union
Seeks to understand why some member‐states of the European Community attempted, with eventual success, to extend supranational authority in the domain of monetary and exchange‐rate policy and to ...
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Seeks to understand why some member‐states of the European Community attempted, with eventual success, to extend supranational authority in the domain of monetary and exchange‐rate policy and to anticipate some of the probable consequences of such extension. It begins by analysing the beliefs that originally underpinned the attempt, concerning the perceived need to resolve the community tensions inherent in independent economic policy‐making. It then considers the economic, political and institutional dilemmas, and uncertainties likely to confront member‐states as economic integration proceeds. Concentrating on the issues of low growth and high unemployment, it assesses how far European Monetary Union is likely to provide a remedy, and whether it will be necessary or desirable to create a counterweight to the authority of the European Central Bank, and to create new supranational organizations in the domain of European macroeconomic governance.Less
Seeks to understand why some member‐states of the European Community attempted, with eventual success, to extend supranational authority in the domain of monetary and exchange‐rate policy and to anticipate some of the probable consequences of such extension. It begins by analysing the beliefs that originally underpinned the attempt, concerning the perceived need to resolve the community tensions inherent in independent economic policy‐making. It then considers the economic, political and institutional dilemmas, and uncertainties likely to confront member‐states as economic integration proceeds. Concentrating on the issues of low growth and high unemployment, it assesses how far European Monetary Union is likely to provide a remedy, and whether it will be necessary or desirable to create a counterweight to the authority of the European Central Bank, and to create new supranational organizations in the domain of European macroeconomic governance.
David A. Steinberg
- Published in print:
- 2015
- Published Online:
- August 2016
- ISBN:
- 9780801453847
- eISBN:
- 9780801454257
- Item type:
- chapter
- Publisher:
- Cornell University Press
- DOI:
- 10.7591/cornell/9780801453847.003.0002
- Subject:
- Economics and Finance, Development, Growth, and Environmental
This chapter develops the conditional preference theory, which contends that the preferences of powerful interest groups are the most important driver of exchange rate policy. Those preferences, ...
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This chapter develops the conditional preference theory, which contends that the preferences of powerful interest groups are the most important driver of exchange rate policy. Those preferences, however, are not fixed or constant, as is often assumed. Rather, preferences for undervalued exchange rates are influenced by a country's institutional context. After first providing some background information about exchange rate economics, the chapter develops the conditional preference theory in four main steps. First, it explains why powerful interest groups, defined as societal actors that control many power resources, influence government decisions regarding exchange rate levels. Second it examines interest groups' preferences. Third, it explains why institutions influence interest groups' preferences. The final step in the argument puts together the two main pieces of the story—power and preferences—to explain when exchange rates are most likely to be undervalued.Less
This chapter develops the conditional preference theory, which contends that the preferences of powerful interest groups are the most important driver of exchange rate policy. Those preferences, however, are not fixed or constant, as is often assumed. Rather, preferences for undervalued exchange rates are influenced by a country's institutional context. After first providing some background information about exchange rate economics, the chapter develops the conditional preference theory in four main steps. First, it explains why powerful interest groups, defined as societal actors that control many power resources, influence government decisions regarding exchange rate levels. Second it examines interest groups' preferences. Third, it explains why institutions influence interest groups' preferences. The final step in the argument puts together the two main pieces of the story—power and preferences—to explain when exchange rates are most likely to be undervalued.
David A. Steinberg
- Published in print:
- 2015
- Published Online:
- August 2016
- ISBN:
- 9780801453847
- eISBN:
- 9780801454257
- Item type:
- chapter
- Publisher:
- Cornell University Press
- DOI:
- 10.7591/cornell/9780801453847.003.0006
- Subject:
- Economics and Finance, Development, Growth, and Environmental
This chapter investigates the impact of interests and institutions on exchange rate policy with case studies of South Korea, Mexico, and Iran. It shows that Korean policymakers in the 1960s and 1970s ...
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This chapter investigates the impact of interests and institutions on exchange rate policy with case studies of South Korea, Mexico, and Iran. It shows that Korean policymakers in the 1960s and 1970s used their control over labor and financial markets to increase industrialists' support for an undervalued exchange rate. Korea's powerful industrialists also provided crucial political backing for President Park's decision to maintain an undervalued exchange rate. Mexican exchange rate politics bears many similarities to Argentine exchange rate politics: Mexican industrialists frequently opposed undervalued exchange rates, and their preferences encouraged Mexican policymakers to overvalue the peso. Iran's weak manufacturing sector typically favored an undervalued exchange rate. Although they received their preferred exchange rate policy in the 1960s and 1970s, Iranian manufacturers had insufficient clout to prevent an overvalued exchange rate in the 1950s, 1980s, or 1990s.Less
This chapter investigates the impact of interests and institutions on exchange rate policy with case studies of South Korea, Mexico, and Iran. It shows that Korean policymakers in the 1960s and 1970s used their control over labor and financial markets to increase industrialists' support for an undervalued exchange rate. Korea's powerful industrialists also provided crucial political backing for President Park's decision to maintain an undervalued exchange rate. Mexican exchange rate politics bears many similarities to Argentine exchange rate politics: Mexican industrialists frequently opposed undervalued exchange rates, and their preferences encouraged Mexican policymakers to overvalue the peso. Iran's weak manufacturing sector typically favored an undervalued exchange rate. Although they received their preferred exchange rate policy in the 1960s and 1970s, Iranian manufacturers had insufficient clout to prevent an overvalued exchange rate in the 1950s, 1980s, or 1990s.
David A. Steinberg
- Published in print:
- 2015
- Published Online:
- August 2016
- ISBN:
- 9780801453847
- eISBN:
- 9780801454257
- Item type:
- chapter
- Publisher:
- Cornell University Press
- DOI:
- 10.7591/cornell/9780801453847.003.0004
- Subject:
- Economics and Finance, Development, Growth, and Environmental
China's undervalued exchange rate has affected the world economy in numerous ways and is among the most contentious issues in contemporary international politics. This chapter examines whether the ...
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China's undervalued exchange rate has affected the world economy in numerous ways and is among the most contentious issues in contemporary international politics. This chapter examines whether the conditional preference theory helps explain exchange rate politics in China between 1993 and 2009. It begins with an overview of China's political and economic system, describing the organization of the labor and financial system and the power of the manufacturing sector. It then examines how politics shaped exchange rate policy in China between 1993 and 2009. The third section summarizes key findings and explains how they shed light on the relationship between domestic politics and undervalued exchange rates more broadly. It is shows that lobbying by the powerful manufacturing sector is a major reason why China kept its exchange rate undervalued for most of the 1993–2009 period.Less
China's undervalued exchange rate has affected the world economy in numerous ways and is among the most contentious issues in contemporary international politics. This chapter examines whether the conditional preference theory helps explain exchange rate politics in China between 1993 and 2009. It begins with an overview of China's political and economic system, describing the organization of the labor and financial system and the power of the manufacturing sector. It then examines how politics shaped exchange rate policy in China between 1993 and 2009. The third section summarizes key findings and explains how they shed light on the relationship between domestic politics and undervalued exchange rates more broadly. It is shows that lobbying by the powerful manufacturing sector is a major reason why China kept its exchange rate undervalued for most of the 1993–2009 period.
David A. Steinberg
- Published in print:
- 2015
- Published Online:
- August 2016
- ISBN:
- 9780801453847
- eISBN:
- 9780801454257
- Item type:
- chapter
- Publisher:
- Cornell University Press
- DOI:
- 10.7591/cornell/9780801453847.003.0005
- Subject:
- Economics and Finance, Development, Growth, and Environmental
This chapter evaluates whether exchange rate overvaluation in Argentina follows the logic of the conditional preference theory. The first part documents the Argentine state's inability to control its ...
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This chapter evaluates whether exchange rate overvaluation in Argentina follows the logic of the conditional preference theory. The first part documents the Argentine state's inability to control its labor and financial systems, and explains why the manufacturing sector should have high levels of influence over the country's exchange rate policies. The second half of the chapter examines the political dynamics of exchange policymaking in Argentina between 1966 and 2012. It is shown that Argentina's manufacturing sector has usually preferred an overvalued exchange rate to an undervalued one. There was one important exception to this general trend: between 2001 and 2005, when the country's economy was suffering from high degrees of excess capacity and business costs became disconnected from undervaluation as a result.Less
This chapter evaluates whether exchange rate overvaluation in Argentina follows the logic of the conditional preference theory. The first part documents the Argentine state's inability to control its labor and financial systems, and explains why the manufacturing sector should have high levels of influence over the country's exchange rate policies. The second half of the chapter examines the political dynamics of exchange policymaking in Argentina between 1966 and 2012. It is shown that Argentina's manufacturing sector has usually preferred an overvalued exchange rate to an undervalued one. There was one important exception to this general trend: between 2001 and 2005, when the country's economy was suffering from high degrees of excess capacity and business costs became disconnected from undervaluation as a result.
Liliane L. Crouhy‐Veyrac and Michèle Saint Marc
- Published in print:
- 1998
- Published Online:
- November 2003
- ISBN:
- 9780198293064
- eISBN:
- 9780191596940
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/0198293062.003.0004
- Subject:
- Economics and Finance, Macro- and Monetary Economics, International
The bilateral French/German real exchange rate does respond to the real fundamentals of relative thrift and productivity as predicted by the NATREX model. Increases in relative thrift, measured by ...
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The bilateral French/German real exchange rate does respond to the real fundamentals of relative thrift and productivity as predicted by the NATREX model. Increases in relative thrift, measured by relative social saving/national product, and increases in relative productivity, measured by the relative capital/employment ratios, both produce long‐run real appreciation of the French franc relative to the Deutsche mark. The sample period, 1971–90, includes a variety of nominal exchange‐rate policies. The responsiveness of the real exchange rate to the fundamentals supports the NATREX assumption that real exchange rates will adjust, regardless of the nominal exchange rate regime. If differing national monetary policies, either actual or expected, prevent the adjustment of relative goods prices, then the pressures to change nominal exchange rates become irresistible, as seen in the disruption of the EMS exchange rates in 1992. Moreover, even with similar monetary policies, wage and price rigidity may slow the adjustment of the actual real exchange rate to the NATREX, increasing the economic costs of a fixed nominal exchange rate.Less
The bilateral French/German real exchange rate does respond to the real fundamentals of relative thrift and productivity as predicted by the NATREX model. Increases in relative thrift, measured by relative social saving/national product, and increases in relative productivity, measured by the relative capital/employment ratios, both produce long‐run real appreciation of the French franc relative to the Deutsche mark. The sample period, 1971–90, includes a variety of nominal exchange‐rate policies. The responsiveness of the real exchange rate to the fundamentals supports the NATREX assumption that real exchange rates will adjust, regardless of the nominal exchange rate regime. If differing national monetary policies, either actual or expected, prevent the adjustment of relative goods prices, then the pressures to change nominal exchange rates become irresistible, as seen in the disruption of the EMS exchange rates in 1992. Moreover, even with similar monetary policies, wage and price rigidity may slow the adjustment of the actual real exchange rate to the NATREX, increasing the economic costs of a fixed nominal exchange rate.
Dominick Salvatore, James W. Dean, and Thomas D. Willett
- Published in print:
- 2003
- Published Online:
- November 2003
- ISBN:
- 9780195155358
- eISBN:
- 9780199832989
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/0195155351.003.0001
- Subject:
- Economics and Finance, International
This introductory chapter begins with an overview of the dollarization debate, which essentially calls for the reevaluation of countries’ exchange rate policies. It argues that although dollarization ...
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This introductory chapter begins with an overview of the dollarization debate, which essentially calls for the reevaluation of countries’ exchange rate policies. It argues that although dollarization has been effective in stopping high inflation, it has been less reliable in providing fiscal discipline and promoting flexible labour markets. Brief descriptions of the papers included in this volume are presented.Less
This introductory chapter begins with an overview of the dollarization debate, which essentially calls for the reevaluation of countries’ exchange rate policies. It argues that although dollarization has been effective in stopping high inflation, it has been less reliable in providing fiscal discipline and promoting flexible labour markets. Brief descriptions of the papers included in this volume are presented.
David A. Steinberg
- Published in print:
- 2015
- Published Online:
- August 2016
- ISBN:
- 9780801453847
- eISBN:
- 9780801454257
- Item type:
- chapter
- Publisher:
- Cornell University Press
- DOI:
- 10.7591/cornell/9780801453847.003.0007
- Subject:
- Economics and Finance, Development, Growth, and Environmental
This concluding chapter reviews the evidence provided in chapters 2 through 5. The evidence confirms that preferences for undervalued exchange rates are context-dependent, and that powerful interest ...
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This concluding chapter reviews the evidence provided in chapters 2 through 5. The evidence confirms that preferences for undervalued exchange rates are context-dependent, and that powerful interest groups influence decisions about exchange rate policy. Together, these two pieces of evidence indicate that undervalued exchange rates are rare at least in part because they fail to receive solid support from powerful interest groups. The chapter suggests that the scholarly literature on political economy would benefit from reconceptualizing the relationship between interests and institutions, and paying more attention to how contextual factors shape preferences. It also discusses a key policy implication of the findings: the potential for certain types of institutional reforms to contribute to better exchange rate policies.Less
This concluding chapter reviews the evidence provided in chapters 2 through 5. The evidence confirms that preferences for undervalued exchange rates are context-dependent, and that powerful interest groups influence decisions about exchange rate policy. Together, these two pieces of evidence indicate that undervalued exchange rates are rare at least in part because they fail to receive solid support from powerful interest groups. The chapter suggests that the scholarly literature on political economy would benefit from reconceptualizing the relationship between interests and institutions, and paying more attention to how contextual factors shape preferences. It also discusses a key policy implication of the findings: the potential for certain types of institutional reforms to contribute to better exchange rate policies.
David A. Steinberg
- Published in print:
- 2015
- Published Online:
- August 2016
- ISBN:
- 9780801453847
- eISBN:
- 9780801454257
- Item type:
- chapter
- Publisher:
- Cornell University Press
- DOI:
- 10.7591/cornell/9780801453847.003.0001
- Subject:
- Economics and Finance, Development, Growth, and Environmental
This introductory chapter sets out the book's purpose, which is to explain why a relatively small number of developing countries keep their exchange rates undervalued while many more overvalue their ...
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This introductory chapter sets out the book's purpose, which is to explain why a relatively small number of developing countries keep their exchange rates undervalued while many more overvalue their exchange rates. Using both quantitative data on over one hundred countries and detailed case studies of five developing countries, this book provides strong evidence in support of a domestic political explanation of undervalued exchange rates. The chapter then discusses the conditional preference theory, which argues that undervalued exchange rates are most likely when the manufacturing sector is powerful and the state controls labor and financial markets. It also considers the implications of the theory for our understanding of the global political economy. This is followed by an overview of the subsequent chapters.Less
This introductory chapter sets out the book's purpose, which is to explain why a relatively small number of developing countries keep their exchange rates undervalued while many more overvalue their exchange rates. Using both quantitative data on over one hundred countries and detailed case studies of five developing countries, this book provides strong evidence in support of a domestic political explanation of undervalued exchange rates. The chapter then discusses the conditional preference theory, which argues that undervalued exchange rates are most likely when the manufacturing sector is powerful and the state controls labor and financial markets. It also considers the implications of the theory for our understanding of the global political economy. This is followed by an overview of the subsequent chapters.
Yung Chul Park and Charles Wyplosz
- Published in print:
- 2010
- Published Online:
- September 2010
- ISBN:
- 9780199587124
- eISBN:
- 9780191723377
- Item type:
- book
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/acprof:oso/9780199587124.001.0001
- Subject:
- Economics and Finance, Financial Economics, South and East Asia
East Asia's recent economic integration is in many ways similar to that undergone by Western Europe following the Second World War. The book analyses the Asian experience from both Asian and European ...
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East Asia's recent economic integration is in many ways similar to that undergone by Western Europe following the Second World War. The book analyses the Asian experience from both Asian and European perspectives. The two regional evolutions share a number features but the political, historical, and economical differences are significant enough to warrant caution in drawing lessons. Even though the quest for exchange rate policy stability has been a longstanding common concern, the European experience — and its monetary union — does not always transfer successfully to Asia. Successes and failures in both regions are highlighted, and suggestions are made for future policy and practice in monetary and financial integration. Particular areas of focus are: Asia's response to the 1997–8 crisis; the euro area's framework for monetary policy implementation, introduced in 1999; initiatives for financial cooperation and macroeconomic surveillance; and the East Asian reliance on markets in a globalized world that makes it difficult for the region to achieve the deep integration seen in Europe. The implications of the recent global financial crisis are also examined although the book has been completed before the public debt crisis hit Europe and forced important policy measures.Less
East Asia's recent economic integration is in many ways similar to that undergone by Western Europe following the Second World War. The book analyses the Asian experience from both Asian and European perspectives. The two regional evolutions share a number features but the political, historical, and economical differences are significant enough to warrant caution in drawing lessons. Even though the quest for exchange rate policy stability has been a longstanding common concern, the European experience — and its monetary union — does not always transfer successfully to Asia. Successes and failures in both regions are highlighted, and suggestions are made for future policy and practice in monetary and financial integration. Particular areas of focus are: Asia's response to the 1997–8 crisis; the euro area's framework for monetary policy implementation, introduced in 1999; initiatives for financial cooperation and macroeconomic surveillance; and the East Asian reliance on markets in a globalized world that makes it difficult for the region to achieve the deep integration seen in Europe. The implications of the recent global financial crisis are also examined although the book has been completed before the public debt crisis hit Europe and forced important policy measures.
David A. Steinberg
- Published in print:
- 2015
- Published Online:
- August 2016
- ISBN:
- 9780801453847
- eISBN:
- 9780801454257
- Item type:
- chapter
- Publisher:
- Cornell University Press
- DOI:
- 10.7591/cornell/9780801453847.003.0003
- Subject:
- Economics and Finance, Development, Growth, and Environmental
This chapter uses two different cross-national quantitative datasets to address the following question: Why do some developing countries undervalue their exchange rates while others maintain ...
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This chapter uses two different cross-national quantitative datasets to address the following question: Why do some developing countries undervalue their exchange rates while others maintain overvalued exchange rates? First, it examines which countries are most likely to maintain undervalued exchange rates, using data on as many as one hundred twenty developing countries from 1975 to 2006. The data indicate that exchange rates are most undervalued when countries combine powerful industrial sectors with state control over labor and financial markets. Second, it analyzes survey data on about two thousand manufacturing firms from over fifty countries in the year 1999 to understand whether and when industrialists favor undervalued exchange rates. These analyses show that manufacturing firms are more supportive of undervalued exchange rates in countries with state-controlled labor and financial systems than they are in other conditions.Less
This chapter uses two different cross-national quantitative datasets to address the following question: Why do some developing countries undervalue their exchange rates while others maintain overvalued exchange rates? First, it examines which countries are most likely to maintain undervalued exchange rates, using data on as many as one hundred twenty developing countries from 1975 to 2006. The data indicate that exchange rates are most undervalued when countries combine powerful industrial sectors with state control over labor and financial markets. Second, it analyzes survey data on about two thousand manufacturing firms from over fifty countries in the year 1999 to understand whether and when industrialists favor undervalued exchange rates. These analyses show that manufacturing firms are more supportive of undervalued exchange rates in countries with state-controlled labor and financial systems than they are in other conditions.
David A. Steinberg
- Published in print:
- 2015
- Published Online:
- August 2016
- ISBN:
- 9780801453847
- eISBN:
- 9780801454257
- Item type:
- book
- Publisher:
- Cornell University Press
- DOI:
- 10.7591/cornell/9780801453847.001.0001
- Subject:
- Economics and Finance, Development, Growth, and Environmental
Exchange rate policy has profound consequences for economic development, financial crises, and international political conflict. Some governments in the developing world maintain excessively weak and ...
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Exchange rate policy has profound consequences for economic development, financial crises, and international political conflict. Some governments in the developing world maintain excessively weak and “undervalued” exchange rates, a policy that promotes export-led development but often heightens tensions with foreign governments. Many other developing countries “overvalue” their exchange rates, which increases consumers' purchasing power but often reduces economic growth. This book argues that the demands of powerful interest groups often dictate government decisions about the level of the exchange rate. Combining case studies of China, Argentina, South Korea, Mexico, and Iran with cross-national statistical analyses, the book reveals that exchange rate policy is heavily influenced by a country's domestic political arrangements. Interest group demands influence exchange rate policy, and national institutional structures shape whether interest groups lobby for an undervalued or an overvalued rate. A country's domestic political system helps determine whether it undervalues its exchange rate and experiences explosive economic growth or if it overvalues its exchange rate and sees its economy stagnate as a result.Less
Exchange rate policy has profound consequences for economic development, financial crises, and international political conflict. Some governments in the developing world maintain excessively weak and “undervalued” exchange rates, a policy that promotes export-led development but often heightens tensions with foreign governments. Many other developing countries “overvalue” their exchange rates, which increases consumers' purchasing power but often reduces economic growth. This book argues that the demands of powerful interest groups often dictate government decisions about the level of the exchange rate. Combining case studies of China, Argentina, South Korea, Mexico, and Iran with cross-national statistical analyses, the book reveals that exchange rate policy is heavily influenced by a country's domestic political arrangements. Interest group demands influence exchange rate policy, and national institutional structures shape whether interest groups lobby for an undervalued or an overvalued rate. A country's domestic political system helps determine whether it undervalues its exchange rate and experiences explosive economic growth or if it overvalues its exchange rate and sees its economy stagnate as a result.
Jeffry A. Frieden
- Published in print:
- 2016
- Published Online:
- January 2018
- ISBN:
- 9780691173849
- eISBN:
- 9781400865345
- Item type:
- chapter
- Publisher:
- Princeton University Press
- DOI:
- 10.23943/princeton/9780691173849.003.0005
- Subject:
- Economics and Finance, Macro- and Monetary Economics
This chapter gives an overview of Latin American currency policy since the collapse of the Bretton Woods monetary order in the early 1970s and provides a statistical analysis of exchange rate ...
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This chapter gives an overview of Latin American currency policy since the collapse of the Bretton Woods monetary order in the early 1970s and provides a statistical analysis of exchange rate choices. It starts with a reminder of the author's analytic expectations, especially as relevant to Latin America, and then goes on to give a historical background to the region's experience and provide a narrative analysis of regional currency policy developments, emphasizing special interest and electoral factors. First, it evaluates the impact of the sort of special interest pressures examined in the US and European cases. It presents evidence that reinforces the idea that internationally oriented economic actors favor a more stable currency. The second set of political factors is related to elections. The evidence seems clear that governments do indeed encourage or allow the currency to appreciate in the run-up to an election, and similarly delay going off a currency peg during that period.Less
This chapter gives an overview of Latin American currency policy since the collapse of the Bretton Woods monetary order in the early 1970s and provides a statistical analysis of exchange rate choices. It starts with a reminder of the author's analytic expectations, especially as relevant to Latin America, and then goes on to give a historical background to the region's experience and provide a narrative analysis of regional currency policy developments, emphasizing special interest and electoral factors. First, it evaluates the impact of the sort of special interest pressures examined in the US and European cases. It presents evidence that reinforces the idea that internationally oriented economic actors favor a more stable currency. The second set of political factors is related to elections. The evidence seems clear that governments do indeed encourage or allow the currency to appreciate in the run-up to an election, and similarly delay going off a currency peg during that period.
Jeffry A. Frieden
- Published in print:
- 2016
- Published Online:
- January 2018
- ISBN:
- 9780691173849
- eISBN:
- 9781400865345
- Item type:
- chapter
- Publisher:
- Princeton University Press
- DOI:
- 10.23943/princeton/9780691173849.003.0001
- Subject:
- Economics and Finance, Macro- and Monetary Economics
This chapter sets forth a theoretical framework for the analysis of the politics of exchange rates. It relies on three factors—international exposure, tradability, and pass-through—to explain as much ...
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This chapter sets forth a theoretical framework for the analysis of the politics of exchange rates. It relies on three factors—international exposure, tradability, and pass-through—to explain as much of currency policy preferences as possible. This can provide building blocks for a broader analysis of the politics of exchange rates. The chapter begins with a statement of the dependent variables of the study. It then presents the author's reasoning and the empirical expectations that flow from it. This is followed by a brief summary of other scholarly studies of the economics and politics of exchange rates in order to situate this study within the broader literature.Less
This chapter sets forth a theoretical framework for the analysis of the politics of exchange rates. It relies on three factors—international exposure, tradability, and pass-through—to explain as much of currency policy preferences as possible. This can provide building blocks for a broader analysis of the politics of exchange rates. The chapter begins with a statement of the dependent variables of the study. It then presents the author's reasoning and the empirical expectations that flow from it. This is followed by a brief summary of other scholarly studies of the economics and politics of exchange rates in order to situate this study within the broader literature.
Jeffry A. Frieden
- Published in print:
- 2016
- Published Online:
- January 2018
- ISBN:
- 9780691173849
- eISBN:
- 9781400865345
- Item type:
- chapter
- Publisher:
- Princeton University Press
- DOI:
- 10.23943/princeton/9780691173849.003.0009
- Subject:
- Economics and Finance, Macro- and Monetary Economics
This introductory chapter begins with discussions of currency choices, currency trade-offs, politics of currency policy, currency policies in open and closed economies, and currency politics applied ...
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This introductory chapter begins with discussions of currency choices, currency trade-offs, politics of currency policy, currency policies in open and closed economies, and currency politics applied across time and space. It then sets out the book's purpose, which is to analyze the politics of exchange rates. The book has both theoretical and empirical ambitions. Theoretically, it focuses on identifying the distributionally motivated currency policy preferences of economic actors—firms, industries, and groups. Empirically, it evaluates the accuracy of its theoretical arguments in a variety of historical and geographic settings. From a historical perspective, it looks at the politics of the gold standard, particularly in the United States. In a more contemporary mode, it examines the political economy of the process of European monetary integration. It also analyzes the politics of Latin American currency policy over the past forty years.Less
This introductory chapter begins with discussions of currency choices, currency trade-offs, politics of currency policy, currency policies in open and closed economies, and currency politics applied across time and space. It then sets out the book's purpose, which is to analyze the politics of exchange rates. The book has both theoretical and empirical ambitions. Theoretically, it focuses on identifying the distributionally motivated currency policy preferences of economic actors—firms, industries, and groups. Empirically, it evaluates the accuracy of its theoretical arguments in a variety of historical and geographic settings. From a historical perspective, it looks at the politics of the gold standard, particularly in the United States. In a more contemporary mode, it examines the political economy of the process of European monetary integration. It also analyzes the politics of Latin American currency policy over the past forty years.
Einar Lie
- Published in print:
- 2020
- Published Online:
- May 2020
- ISBN:
- 9780198860013
- eISBN:
- 9780191892387
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/oso/9780198860013.003.0012
- Subject:
- Business and Management, Business History, Finance, Accounting, and Banking
This chapter studies how Norges Bank came to play a central, technical role in maintaining and defending a stable krone exchange rate during the years 1946–86. This role was reflected in how the bank ...
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This chapter studies how Norges Bank came to play a central, technical role in maintaining and defending a stable krone exchange rate during the years 1946–86. This role was reflected in how the bank advised on the basis of a loyal position to the fixed krone exchange rate regime and to binding international exchange rate cooperation. In 1978, Norway backed out of the European fixed exchange rate cooperation, and during 1976–86, the krone was devalued ten times. Even though Norges Bank officially came to contribute to both recommending and carrying out this policy, the policy defied the strong ideals and viewpoints of the organization. The exchange rate policy, and the problems it led to in relation to the central bank, caused the government, in the first half of the 1980s, to push Norges Bank completely aside when it came to the shaping of Norwegian exchange rate policy. Nevertheless, much of the policy was still shaped inside the walls of the institution.Less
This chapter studies how Norges Bank came to play a central, technical role in maintaining and defending a stable krone exchange rate during the years 1946–86. This role was reflected in how the bank advised on the basis of a loyal position to the fixed krone exchange rate regime and to binding international exchange rate cooperation. In 1978, Norway backed out of the European fixed exchange rate cooperation, and during 1976–86, the krone was devalued ten times. Even though Norges Bank officially came to contribute to both recommending and carrying out this policy, the policy defied the strong ideals and viewpoints of the organization. The exchange rate policy, and the problems it led to in relation to the central bank, caused the government, in the first half of the 1980s, to push Norges Bank completely aside when it came to the shaping of Norwegian exchange rate policy. Nevertheless, much of the policy was still shaped inside the walls of the institution.
Janine Aron, Brian Kahn, and Geeta Kingdon (eds)
- Published in print:
- 2009
- Published Online:
- May 2009
- ISBN:
- 9780199551460
- eISBN:
- 9780191720376
- Item type:
- book
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/acprof:oso/9780199551460.001.0001
- Subject:
- Economics and Finance, Public and Welfare, Economic Systems
South Africa experienced a momentous change of government from the Apartheid regime to its first democratic government in 1994. This book provides an up-to-date assessment of South Africa's economic ...
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South Africa experienced a momentous change of government from the Apartheid regime to its first democratic government in 1994. This book provides an up-to-date assessment of South Africa's economic policies and performance under democracy. The book includes a stand-alone introduction and economic overview, as well as chapters on growth, monetary and exchange rate policy, fiscal policy, capital flows, and trade policy; investment, industrial, and competition policy; on the effect of AIDS in the macroeconomy; and on unemployment, education, inequality, and poverty. Each chapter, and the overview chapter in particular, also addresses prospects for the future.Less
South Africa experienced a momentous change of government from the Apartheid regime to its first democratic government in 1994. This book provides an up-to-date assessment of South Africa's economic policies and performance under democracy. The book includes a stand-alone introduction and economic overview, as well as chapters on growth, monetary and exchange rate policy, fiscal policy, capital flows, and trade policy; investment, industrial, and competition policy; on the effect of AIDS in the macroeconomy; and on unemployment, education, inequality, and poverty. Each chapter, and the overview chapter in particular, also addresses prospects for the future.
Agustín Carstens and Guillermo Ortiz Martinez
- Published in print:
- 2003
- Published Online:
- February 2013
- ISBN:
- 9780226032146
- eISBN:
- 9780226032153
- Item type:
- chapter
- Publisher:
- University of Chicago Press
- DOI:
- 10.7208/chicago/9780226032153.003.0007
- Subject:
- Economics and Finance, International
This chapter examines the experience of Mexico with a floating exchange rate regime. It reviews Mexico's problematic transition to the floating exchange rate regime during 1994–95 and describe how ...
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This chapter examines the experience of Mexico with a floating exchange rate regime. It reviews Mexico's problematic transition to the floating exchange rate regime during 1994–95 and describe how monetary and exchange rate policy have been conducted under this regime. This chapter analyzes the behavior of inflation, exchange rates and other financial and real variables during the float and suggests that the floating exchange rate regime in Mexico has performed better than conventional wisdom would have led us to believe.Less
This chapter examines the experience of Mexico with a floating exchange rate regime. It reviews Mexico's problematic transition to the floating exchange rate regime during 1994–95 and describe how monetary and exchange rate policy have been conducted under this regime. This chapter analyzes the behavior of inflation, exchange rates and other financial and real variables during the float and suggests that the floating exchange rate regime in Mexico has performed better than conventional wisdom would have led us to believe.
Jeffry A. Frieden
- Published in print:
- 2016
- Published Online:
- January 2018
- ISBN:
- 9780691173849
- eISBN:
- 9781400865345
- Item type:
- chapter
- Publisher:
- Princeton University Press
- DOI:
- 10.23943/princeton/9780691173849.003.0004
- Subject:
- Economics and Finance, Macro- and Monetary Economics
This chapter analyzes the process of European monetary integration, focusing on the decades that led up to the creation of the common currency. This is because this period is one in which, as in the ...
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This chapter analyzes the process of European monetary integration, focusing on the decades that led up to the creation of the common currency. This is because this period is one in which, as in the gold standard era, national governments had to decide on their currency policy, and, again as in the gold standard period, there were major domestic political conflicts over this choice. The battles over exchange rate policy in Europe since the early 1970s were at the center of the broader process of European integration. The eventual adoption of the euro was perhaps the crowning achievement of prointegration forces, and both the process and result reflect the central realities of contemporary Europe's political economy.Less
This chapter analyzes the process of European monetary integration, focusing on the decades that led up to the creation of the common currency. This is because this period is one in which, as in the gold standard era, national governments had to decide on their currency policy, and, again as in the gold standard period, there were major domestic political conflicts over this choice. The battles over exchange rate policy in Europe since the early 1970s were at the center of the broader process of European integration. The eventual adoption of the euro was perhaps the crowning achievement of prointegration forces, and both the process and result reflect the central realities of contemporary Europe's political economy.