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The Political Economy of Latin American Currency Crises

The Political Economy of Latin American Currency Crises

Chapter:
(p.220) Chapter 6 The Political Economy of Latin American Currency Crises
Source:
Currency Politics
Author(s):
Jeffry A. Frieden
Publisher:
Princeton University Press
DOI:10.23943/princeton/9780691173849.003.0006

This chapter looks specifically at the political economy of currency crises. This requires attempting to answer questions such as, why do governments so often delay depreciations until it is too late—until the (inevitable) depreciation causes a major crisis? Why do governments sometimes choose to depreciate before it is too late? An arresting example of this set of questions was given by the behavior of the Argentine and Brazilian governments in the late 1990s. Faced with hyperinflation, both governments had adopted a one-to-one currency peg with the US dollar in the early 1990s. The chapter starts with a general description of how such currency crises unfold. It then provides an in-depth analysis of the Mexican currency crisis of 1994 and of Argentine and Brazilian developments between 1991 and 2001.

Keywords:   political economy, currency crises, currency policy, Latin America, Brazil, Argentina, Mexico

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