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Demanding DevaluationExchange Rate Politics in the Developing World$
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David A. Steinberg

Print publication date: 2015

Print ISBN-13: 9780801453847

Published to Cornell Scholarship Online: August 2016

DOI: 10.7591/cornell/9780801453847.001.0001

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Interests, Institutions, and Exchange Rates in South Korea, Mexico, and Iran

Interests, Institutions, and Exchange Rates in South Korea, Mexico, and Iran

Chapter:
(p.163) 5 Interests, Institutions, and Exchange Rates in South Korea, Mexico, and Iran
Source:
Demanding Devaluation
Author(s):

David A. Steinberg

Publisher:
Cornell University Press
DOI:10.7591/cornell/9780801453847.003.0006

This chapter investigates the impact of interests and institutions on exchange rate policy with case studies of South Korea, Mexico, and Iran. It shows that Korean policymakers in the 1960s and 1970s used their control over labor and financial markets to increase industrialists' support for an undervalued exchange rate. Korea's powerful industrialists also provided crucial political backing for President Park's decision to maintain an undervalued exchange rate. Mexican exchange rate politics bears many similarities to Argentine exchange rate politics: Mexican industrialists frequently opposed undervalued exchange rates, and their preferences encouraged Mexican policymakers to overvalue the peso. Iran's weak manufacturing sector typically favored an undervalued exchange rate. Although they received their preferred exchange rate policy in the 1960s and 1970s, Iranian manufacturers had insufficient clout to prevent an overvalued exchange rate in the 1950s, 1980s, or 1990s.

Keywords:   South Korea, Mexico, Iran, exchange rate policy, monetary policy, undervalued exchange rate, overvalued exchange rate

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