Tag Archives: Argentina

Elections and Devaluations

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May 2, 2024 — Lots of countries are voting.  Recent elections in a number of Emerging Market and Developing Economies (EMDEs) have demonstrated anew the proposition that major currency devaluations are more likely to come immediately after an election, rather than before one. Nigeria, Turkey, Argentina, Egypt, and Indonesia are five countries that have experienced post-election devaluations within the last year.

  1. The election-devaluation cycle

Economists will recall a 50-year-old paper by Nobel Prize winning professor Bill Nordhaus as essentially initiating research on the Political Business Cycle (PBC).  The PBC refers to governments’ general inclination towards fiscal and monetary expansion in the year leading up to an election, in hopes of re-electing the incumbent president or at least the incumbent party.  The idea is that growth in output and employment will accelerate before the election, boosting the government’s popularity, whereas the major costs in terms of debt troubles and inflation will come after the election. read more

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Devaluations are Often Associated with Changes in Government

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(4/16/2015) The possibility of devaluation is apparently an issue in the upcoming Argentine elections.  (The forward rate for next year is about 13 pesos per dollar, which is close to the informal rate and suggests a big  devaluation relative to the current official exchange rate of 8.)   In this connection, an Argentine newspaper has asked me about “Contractionary Currency Crashes,” a paper that I presented as the 5th Mundell-Fleming Lecture of the  IMF’s Annual Research Conference. 

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It Takes More than Two to Tango: Cry, But Not for Argentina, nor for the Holdouts

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U.S. federal courts have ruled that Argentina is prohibited from making payments to fulfill 2005 and 2010 agreements with its creditors to restructure its debt, so long as it is not also paying a few creditors that have all along been holdouts from those agreements.  The judgment is likely to stick, because the judge (Thomas Griesa, in New York) told American banks on June 27 that it would be illegal for them to transfer Argentina’s payments to the 92 per cent of creditors who agreed to be restructured and because the US Supreme Court in June declined to review the lower court rulings. read more

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