Democratic Institutions and Exchange-rate Commitments

“…Most studies focus on crises such as large changes in the exchange rate (15 % or 20 %) or speculative attacks (See Klein and Marion 1994;Edwards 1989;Edwards and Montiel 1989;Frankel and Rose 1996;Eichengreen et.al. 1996;Krugman 1979;Bernhard and Leblang 1999). Our interest is not in devaluations per se, however, but in whether governments keep whatever commitments they make, because we want to know whether voters use this information to draw inferences about future behavior.…”

Section: Main Explanatory Variablesmentioning

confidence: 99%

Risky Signals: The Political Costs of Exchange Rate Policy in Post-Communist Countries

Bagashka

Stone

2013

Int Stud Q

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It can be risky for governments to renege on exchange rate commitments, but it is misleading to characterize the costs as audience costs. While an audience costs approach assumes that the punishment for reneging is automatic, we model the choice of exchange rate policy in the shadow of elections as a signaling game between voters and governments, where governments have private information and voters are rational. We find that voters draw different inferences when they see reneging by different actors, and only Left governments are punished for breaking their promises. We test this hypothesis in the context of the post-Communist countries in the 1990s, and find that Left governments were more likely to fall if they reneged on exchange rate commitments, but Right governments were not.

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“…Since the collapse of the Bretton Woods Agreement in the early 1970s, no single worldwide exchange-rate arrangement has prevailed. 5 This suggests that monetary globalization involves a variety of political-economic processes, not simply a single imperialism or free-floating market capitalism (Bernhard and Leblang 1999). There are four ways in which currencies tend to work with respect to any given national territory, paralleling the four sovereignty regimes.…”

Section: Currencies and Sovereignty Regimesmentioning

confidence: 99%

Sovereignty Regimes: Territoriality and State Authority in Contemporary World Politics

Agnew

2005

Annals of the Association of American Geographers

454

212

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I propose a concept of effective sovereignty to argue that states participate in sovereignty regimes that exhibit distinctive combinations of central state authority and political territoriality. Two basic conclusions, drawing from recent research in political geography and other fields, are that sovereignty is neither inherently territorial nor is it exclusively organized on a state-by-state basis. This matters because so much political energy has been invested in organizing politics in general and democracy in particular in relation to states. Typically, writing about sovereignty regards sovereignty as providing a norm that legitimizes central state authority. Unfortunately, little or no attention is given as to why this should always entail a territorial definition of political authority and to why states are thereby its sole proprietors. The dominant approach continues to privilege the state as the singular font of authority even when a state's sovereignty may be decried as hypocrisy and seen as divisible or issue-specific rather than ''real'' or absolute. I put forward a model of sovereignty alternative to the dominant one by identifying four ''sovereignty regimes'' that result from distinctive combinations of central state authority (legitimate despotic power) on the one hand, and degree of political territoriality (the administration of infrastructural power) on the other. By ''regime'' I mean a system of rule, not merely some sort of international protocol or agreement between putatively equal states. I then examine the general trajectory of the combination of sovereignty regimes from the early nineteenth century to the present. The contemporary geography of currencies (specifically exchange-rate arrangements) serves to empirically illustrate the general argument about sovereignty regimes. Finally, a brief conclusion suggests that the dominant Westphalian model of state sovereignty in political geography and international relations theory, deficient as it has long been for understanding the realities of world politics, is even more inadequate today, not only for its ignoring the hierarchy of states and sources of authority other than states, but also because of its mistaken emphasis on the geographical expression of authority (particularly under the ambiguous sign of ''sovereignty'') as invariably and inevitably territorial.

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Democratic Institutions and Exchange-rate Commitments

Cited by 182 publications

References 67 publications

Capital Account Liberalization: What Do Cross-Country Studies Tell Us?

Capital Account Liberalization: What Do Cross-Country Studies Tell Us?

Risky Signals: The Political Costs of Exchange Rate Policy in Post-Communist Countries

Sovereignty Regimes: Territoriality and State Authority in Contemporary World Politics

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