Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/202947
Authors: 
Razmi, Arslan
Year of Publication: 
2018
Series/Report no.: 
Working Paper No. 2018-14
Abstract: 
I develop the implications for real exchange rate cycles of different policy preferences, focusing in particular on broadly stylized features of major Latin American and East Asian economies. Recent political science literature has emphasized the role of factors such as the influence of the manufacturing sector and the nature of labor markets. I formalize some of these insights in a developing country framework with policy makers who inter-temporally optimize and voters/audiences that are incompletely informed. Given the choice between assigning greater weight to immediate worker purchasing power versus generating manufacturing employment and income over time, I show that countries where policy makers choose the former are more likely to experience cycles with overvaluation, current account deficits, and abrupt (postponed) devaluations.
Subjects: 
Political business cycles
real exchange rate
capital accumulation
balance of payments
JEL: 
O25
D72
F41
O14
Document Type: 
Working Paper

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