Aysan, Ahmet Faruk (2006): The Role of Distribution of the Income Shares of Individuals in Tradables and Nontradables on Exchange Rate Fluctuations and Delay of Stabilizations.
Download (227kB) | Preview
This paper shows that exchange rate alignments are also used for the redistribution of income among different groups. The heterogeneous impacts of stabilization policies lead to formation of various coalitions throughout the evolution of stabilization programs. These coalitions can produce unsustainable economic policies at the expense of other groups. The model categorizes these various groups with respect to their shares in total production of tradables and nontradables. An increase in the relative prices of nontradables benefits the poor more than the rich and middle classes. In addition to the poor, the rich benefit from unsustainable macroeconomic polices by lending to the government and eventually escaping the cost of stabilization in the long run.
|Item Type:||MPRA Paper|
|Original Title:||The Role of Distribution of the Income Shares of Individuals in Tradables and Nontradables on Exchange Rate Fluctuations and Delay of Stabilizations|
|Keywords:||Stabilization policies; Overvaluation; Redistribution; Exchange Rate Fluctuations|
|Subjects:||E - Macroeconomics and Monetary Economics > E3 - Prices, Business Fluctuations, and Cycles > E32 - Business Fluctuations ; Cycles
F - International Economics > F3 - International Finance > F30 - General
F - International Economics > F4 - Macroeconomic Aspects of International Trade and Finance > F41 - Open Economy Macroeconomics
|Depositing User:||Ahmet Faruk Aysan|
|Date Deposited:||30. Oct 2007|
|Last Modified:||26. Feb 2013 16:39|
Acemoglu D., Johnson S., Robinson and J. Thaicharoen Y. (2002) “Institutional Causes, Macroeconomic Symptoms: Volatility, Crises and Growth” forthcoming Journal of Monetary Economics, Carnegie-Rochester Conference Series
Alesina, A. and A. Drazen (1991) "Why are Stabilizations Delayed?” American Economic Review, 81, December: 1170-1188.
Alesina, A and Tabellini, G. (1989) “External Debt, Capital Flight and Political Risk” Journal of International Economics, 27, 199-220.
Agénor Pierre-Richard (2002) “Business Cycles, Economic Crises, and the Poor: Testing for Asymmetric Effects” forthcoming in Journal of Policy Reform.
Aysan, A. (2006) “Distributional Effects of Temporary Exchange Rate Based Stabilization Programs under Financial Frictions”, Boğaziçi University, Mimeo. Baldacci, E.,De Mello Jr., L. Inchauste Comboni, M. G. (2002) “Financial Crises, Poverty, and Income Distribution”, IMF Working Papers 0204, International Monetary Fund Berg, A and Sachs, J. (1988) “The Debt Crisis: Structural Explanations of Country Performance”, Journal of Development Economics, 29, 271-306.
Caballero, Ricardo J. and Arvind Krishnamurthy, (1999) “Emerging Markets Crises: An Asset Markets Perspective.” Mimeo, Sloan School of Business, MIT, Cambridge: MA.
Calvo, Guillermo A. (1986) "Temporary Stabilization: Predetermined Exchange Rates," Journal of Political Economy, v. 94, pp.1319-1329.
Calvo, G. and Reinhart C. (2000) “When Capital Inflows Come to a Sudden Stop: Consequences and Policy Options” in P. Kenen and A. Swoboda, Key Issues in Reform of the International Monetary and Financial System, Washington DC: International Monetary Fund.
Calvo, Guillermo A.and Carlos A. Végh, (1999), “Inflation Stabilization” chapter in Handbook of Macroeconomics, edited by J.Taylor and M. Woodford, (Amsterdam, Netherlands: North Holland, 1999).
Calvo, Guillermo A.and Carlos A. Végh, (1993), “Exchange-Rate-Based Stabilisation under Imperfect Credibility,”in H. Frisch and A. Worgotter eds. Proceedings from IEA Conference on Open Economy Macroeconomics, England: Macmillan Press Ltd., 3-28.
Calvo, Guillermo A and Allan Drazen, (1998), “Uncertain Duration of Reform: Dynamic Implications,” Macroeconomic Dynamics.
Dornbusch, Rudiger (1982), "Stabilization Policies in Developing Countries: What have we Learned?" World Development, vol. 10, pp. 701-708.
Drazen, Allan and Elhanan Helpman (1987) “Stabilization with Exchange Rate Management,” Quarterly Journal of Economics, v. 11, 1-13.
Drazen, Allan and Elhanan Helpman (1988), "Stabilization with Exchange Rate Management Under Uncertainty," in Economic Effects of the Government Budget, ed. by E. Helpman, A. Razin and E. Sadka, MIT Press, Cambridge:MA
Easterly, William (2001) “The Lost Decades: The Developing Countries Stagnation in Spite of Policy Reform,” Journal of Economic Growth, 9, 135-157.
Fernandez R. and Rodrik D. (1991), “Resistance to Reform: Status Quo Bias in the Presence of Individual-Specific Uncertainty," American Economic Review 81(5).
Helpman, Elhanan and Assaf Razin (1987), "Exchange Rate Management: Intertemporal Tradeoffs," American Economic Review, vol. 77, pp.107-123.
Laban, R and Sturzenegger, F. (1994), “Distributional Conflict, Financial Adoption and Delayed Stabilizations”, Economics and Politics, 6,257-276.
Mendoza, Enrique G. (2000-a), “On the Benefits of Dollarization when Stabilization Policy is not Credible and Financial Markets are Imperfect,” mimeo, Department of Economics, Duke University.
Mendoza, Enrique G. (2000-b), “Credit, Prices, and Crashes: Sudden Stops Economics in an Equilibrium Framework,” Mimeo Department of Economics, Duke University.
Mendoza, Enrique G. and Martin Uribe (2000), “Devaluation Risk and the Business Cycle Implications of Exchange Rate Management,” Carnegie-Rochester Conference Series on Public Policy, vol. 53,forthcoming.
Perotti R. (1996) “Redistribution and Non-Consumption Smoothing in an Open Economy”, The Review of Economic Studies, Vol. 63, No. 3. (Jul., 1996), pp. 411-433.
Rebelo, Sergio and Carlos A. Végh, (1996), "Real Effects of Exchange-Rate-Based Stabilization," NBER Macro Annual, National Bureau of Economic Research, Cambridge: MA.
Reinhart Carmen M. and Carlos A. Végh (1995), "Nominal Interest Rates, Consumption Booms, and Lack of Credibility: A Quantitative Examination," Journal of Development Economics, v.46.
Rodriguez, Carlos A. (1982), "The Argentine Stabilization Plan of December 20th," World Development, vol. 10, pp. 801-811.
Rodrik, Dani (1999) “Where Did All the Growth Go? External Shocks, Social Conflict and Growth Collapses,” Journal of Economic Growth.
Roldós, Jorge (1995), "Supply-Side Effects of Disinflation," IMF Staff Papers, vol 42, pp. 158 183.
Uribe, Martín (1997), "Exchange-Rate-Based Inflation Stabilization: the Initial Real Effects of Credible Plans," Journal of Monetary Economics, June, 39(2), 197-221.
Velasco, A. (1998) “The Common Property Approach to the Political Economy of Fiscal Policy” in Struzenegger and Tommasi (eds.) The Political Economy of Reform. MIT Press.