Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/300486 
Authors: 
Year of Publication: 
2024
Series/Report no.: 
Working Paper No. 2024-4
Publisher: 
University of Massachusetts, Department of Economics, Amherst, MA
Abstract: 
An important body of literature explores the political economy reasons underlying delays in macroeconomic stabilization. This paper develops a framework to analyze conflict between two groups of economic actors, one that has an endowment of internationally tradable goods and another that is endowed with non-tradable goods. The focus is on the exchange rate policy in a developing country set-up where the government employs seigniorage revenue to finance spending pre-stabilization, and faces fiscal and balance of payments problems that necessitate stabilization with a step devaluation. The presence of exchange rate and endowment uncertainty, the role of forward-looking expectations, and the possibility of IMF aid influence the likelihood, timing, and terms of a national consensus on stabilization in interesting ways.
Subjects: 
Macroeconomic stabilization
seigniorage
inflation
devaluation
capital flight
IMF programs
JEL: 
E31
F34
F41
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by Logo
Document Type: 
Working Paper

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