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Political uncertainty and the peso problem
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García-Fronti, Javier and Zhang, Lei (2008) Political uncertainty and the peso problem. Revista de Economía Política de Buenos Aires, Vol.1 (No.3-4). pp. 33-45.
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Official URL: http://www.econ.uba.ar/www/departamentos/economia/...
Abstract
This paper analyses the relation between political uncertainty and the Peso Problem in emerging markets. Initially, it is assumed that the country has a hard peg system (the present government will never devalue). As for the political opposition, however, it is open to the possibility of leaving the fixed regime when it comes to power. Assuming that the change of government follows a Poisson distribution, our model shows that the expectations of a devaluation under the subsequent new government may drive up country risk premium under the first government. Sovereign spreads in Argentina in 2001 are used to illustrate the argument.
Item Type: | Journal Article | ||||
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Subjects: | H Social Sciences > HB Economic Theory | ||||
Divisions: | Faculty of Social Sciences > Economics | ||||
Journal or Publication Title: | Revista de Economía Política de Buenos Aires | ||||
Publisher: | Facultad de Ciencias Económicas de la Universidad de Buenos Aires | ||||
Official Date: | November 2008 | ||||
Dates: |
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Volume: | Vol.1 | ||||
Number: | No.3-4 | ||||
Number of Pages: | 13 | ||||
Page Range: | pp. 33-45 | ||||
Status: | Peer Reviewed | ||||
Publication Status: | Published | ||||
Access rights to Published version: | Open Access (Creative Commons) | ||||
Funder: | Economic and Social Research Council (ESRC) | ||||
Grant number: | RES-051-27-0125, RES-165-25-0006, RES-156-25-0032 | ||||
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