Political Stabilization Cycles in High Inflation Economies
High inflation economies often do not exhibit smooth inflationary processes, but rather stop-go cycles. This paper relates these stop-go episodes of inflation to a political cycle. The government can try to repress inflation until after the elections in order to increase the chances of being reelected. It is modeled as a two-period game of incomplete information where voters try to pick the most competent government, and inflation can be lowered by the government in the short run through foreign debt accumulation. Several stabilization episodes in Latin America, such as the Primavera Plan in Argentina and the Cruzado and Real Plans in Brazil, are used to illustrate the model.
Saved in:
| Main Author: | |
|---|---|
| Other Authors: | |
| Format: | Working Papers biblioteca |
| Language: | English |
| Published: |
Inter-American Development Bank
|
| Subjects: | Integration and Trade, Elections, Financial Crisis and Structural Adjustement, D72 - Political Processes: Rent-Seeking Lobbying Elections Legislatures and Voting Behavior, E31 - Price Level • Inflation • Deflation, high inflation;WP-309;political economy, |
| Online Access: | http://dx.doi.org/10.18235/0011614 https://publications.iadb.org/en/political-stabilization-cycles-high-inflation-economies |
| Tags: |
Add Tag
No Tags, Be the first to tag this record!
|