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Title:Default, Electoral Uncertainty and the Choice of Exchange Regime PDF Logo
Authors:Hefeker, Carsten
Issue Date:2004
Series/Report no.:HWWA Discussion Paper 298
Abstract:The paper explores the interaction between debt crises and devaluation. Since the optimal level of devaluation in a crisis depends on the level of debt that has to be serviced, a default makes a devaluation less likely. Expected devaluation depends thus on expectations about default which is also a function of the type of policymaker. Therefore, the decision to devalue can be forced upon the government by adverse expectations about default and the type of policymaker in office. I also explore how these uncertainties affect the policymaker?s choice of exchange rate regime.
Subjects:debt crisis
currency crisis
exchange rate regime
JEL:F34
F33
Document Type:Working Paper
Appears in Collections:HWWA Discussion Paper, Hamburgisches Welt-Wirtschafts-Archiv

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