Please use this identifier to cite or link to this item: http://hdl.handle.net/1822/1362

TitlePolitical business cycles and inflation stabilization
Author(s)Castro, Vítor
Veiga, Francisco José
KeywordsInflation stabilization
nominal anchors
political business cycles
Issue date2002
Series/Report no.Working paper series / NIPE
9
Abstract(s)When the choice of the nominal anchor and timing of inflation stabilization is analyzed with models of political business cycles, there is room for political opportunism of policymakers. The different business cycles associated with exchange rate-based (ERBS) and money-based stabilizations (MBS) imply that the decision regarding the timing and nominal anchor of stabilization may be affected by the timing of elections. Namely, an opportunistic policymaker is more likely to implement an ERBS than a MBS before elections, while the opposite happens after elections. Empirical results obtained when estimating a multinomial logit model for a sample of 35 stabilization programs implemented in chronic inflation countries clearly support this hypothesis.
TypeWorking paper
URIhttp://hdl.handle.net/1822/1362
AccessOpen access
Appears in Collections:NIPE - Documentos de Trabalho

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