Exchange Rate Regime,Central Bank Independence,and Political Business Cycles in Brazil |
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Authors: | Taeko Hiroi |
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Institution: | (1) Department of Political Science, The University of Texas at El Paso, 500 W. University Avenue, El Paso, TX 79968, USA |
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Abstract: | This article examines policy consequences of electoral cycles and exchange rate regime choices in Brazil. The literature on
opportunistic political business cycles maintains that governments adopt expansionary economic policies before elections to
mobilize voters’ support. However, research findings in Latin America based on the theory has been inconclusive. I argue that
the lack of conclusive evidence in Latin America stems from measurement errors common in the use of cross-national aggregate
data. Using Brazil’s monthly data from 1985 to 2006, this article shows that there are electorally induced fiscal cycles under
fixed and crawling peg exchange rate regimes and electorally induced monetary cycles under floating exchange rates only when
the nation’s central bank is not independent. Indeed, accounting for Brazil’s unique economic contingencies and longitudinal
variations in the de facto central bank independence, its public policy behavior remarkably resembles that of the more affluent,
economically stable OECD countries.
Taeko Hiroi
is assistant professor of political science at The University of Texas at El Paso. Her research focuses on political institutions
and political economy in Latin America. Her most recent publications appear in Latin American Perspectives, Comparative Political Studies, and The Journal of Legislative Studies. |
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Keywords: | Exchange rate Central Bank Brazil Political business cycle Election |
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