Skip to Main Content
HBS Home
  • About
  • Academic Programs
  • Alumni
  • Faculty & Research
  • Baker Library
  • Giving
  • Harvard Business Review
  • Initiatives
  • News
  • Recruit
  • Map / Directions
Faculty & Research
  • Faculty
  • Research
  • Featured Topics
  • Academic Units
  • …→
  • Harvard Business School→
  • Faculty & Research→
Publications
Publications
  • Article
  • Economics & Politics

On the Political Economy of Temporary Stabilization Programs

By: Laura Alfaro
  • Format:Print
ShareBar

Abstract

This paper provides a political economy explanation for temporary exchange-rate-based stabilization programs by focusing on the distributional effects of real exchange-rate appreciation. I propose an economy in which agents are endowed with either tradable or nontradable goods. Under a cash-in-advance assumption, a temporary reduction in the devaluation rate induces a consumption boom accompanied by real appreciation, which hurts the owners of tradable goods. The owners of nontradables have to weigh two opposing effects: an increase in the present value of nontradable goods wealth and a negative intertemporal substitution effect. For reasonable parameter values, owners of nontradables are better off.

Keywords

Government and Politics; Economy; Balance and Stability; Programs; Currency Exchange Rate; Cash; Value; Distribution

Citation

Alfaro, Laura. "On the Political Economy of Temporary Stabilization Programs." Economics & Politics 14, no. 2 (July 2002): 133–161.
  • Find it at Harvard
  • Read Now
  • Purchase

About The Author

Laura Alfaro

General Management
→More Publications

More from the Author

    • 2022
    • Faculty Research

    Distributional Consequences of Monetary Policy Across Races: Evidence from the U.S. Credit Register

    By: Laura Alfaro, Ester Faia and Camelia Minoiu
    • March 2022
    • Faculty Research

    El Salvador: Launching Bitcoin as Legal Tender

    By: Laura Alfaro, Carla Larangeira and Ruth Costas
    • 2022
    • Faculty Research

    Can Evidence-Based Information Shift Preferences Towards Trade Policy?

    By: Laura Alfaro, Maggie X. Chen and Davin Chor
More from the Author
  • Distributional Consequences of Monetary Policy Across Races: Evidence from the U.S. Credit Register By: Laura Alfaro, Ester Faia and Camelia Minoiu
  • El Salvador: Launching Bitcoin as Legal Tender By: Laura Alfaro, Carla Larangeira and Ruth Costas
  • Can Evidence-Based Information Shift Preferences Towards Trade Policy? By: Laura Alfaro, Maggie X. Chen and Davin Chor
ǁ
Campus Map
Harvard Business School
Soldiers Field
Boston, MA 02163
→Map & Directions
→More Contact Information
  • Make a Gift
  • Site Map
  • Jobs
  • Harvard University
  • Trademarks
  • Policies
  • Digital Accessibility
Copyright © President & Fellows of Harvard College