Demanding Devaluation: Exchange Rate Politics in the Developing World
David A. Steinberg
Abstract
Exchange rate policy has profound consequences for economic development, financial crises, and international political conflict. Some governments in the developing world maintain excessively weak and “undervalued” exchange rates, a policy that promotes export-led development but often heightens tensions with foreign governments. Many other developing countries “overvalue” their exchange rates, which increases consumers' purchasing power but often reduces economic growth. This book argues that the demands of powerful interest groups often dictate government decisions about the level of the exch ... More
Exchange rate policy has profound consequences for economic development, financial crises, and international political conflict. Some governments in the developing world maintain excessively weak and “undervalued” exchange rates, a policy that promotes export-led development but often heightens tensions with foreign governments. Many other developing countries “overvalue” their exchange rates, which increases consumers' purchasing power but often reduces economic growth. This book argues that the demands of powerful interest groups often dictate government decisions about the level of the exchange rate. Combining case studies of China, Argentina, South Korea, Mexico, and Iran with cross-national statistical analyses, the book reveals that exchange rate policy is heavily influenced by a country's domestic political arrangements. Interest group demands influence exchange rate policy, and national institutional structures shape whether interest groups lobby for an undervalued or an overvalued rate. A country's domestic political system helps determine whether it undervalues its exchange rate and experiences explosive economic growth or if it overvalues its exchange rate and sees its economy stagnate as a result.
Keywords:
exchange rate policy,
economic development,
financial crises,
international political conflict,
exchange rates,
domestic politics,
undervalued exchange rate,
overvalued exchange rate
Bibliographic Information
| Print publication date: 2015 |
Print ISBN-13: 9780801453847 |
| Published to Cornell Scholarship Online: August 2016 |
DOI:10.7591/cornell/9780801453847.001.0001 |
Authors
Affiliations are at time of print publication.
David A. Steinberg, author
Assistant Professor of International Political Economy, The Johns Hopkins University's School of Advanced International Studies
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