The Benefits of Crises for Economic Reforms

Drazen, Allan; Grilli, Vittorio

doi:10.3386/w3527

Cited by 282 publications

(285 citation statements)

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“…11 See Alesina and Drazen (1991) and Drazen and Grilli (1993) for models consistent with this hypothesis and Drazen and Easterly (2001) for empirical evidence. See also Drazen (2000) for an extensive discussion of the political economy of stabilization policies.…”

Section: The Data On Regulationmentioning

confidence: 99%

“…REG indicator of regulatory impediments to product market competition, excluding public ownership; ENERGY, COMMUNICATIONS, TRANSPORT, RETAIL and PROFESSIONAL sectorial dummy variable that equals 1 for the corresponding sector; ESM dummy variable equal to 1 from 1993 onward for the countries that enter the EU's Single Market Programme; EMU dummy variable equal to 1 from 1999 onward for the countries that enter the EMU. COMPET1 growth rate of the CPI relative to competitors; COMPET2 growth rate of the export goods deflators relative to competitors; N. OF DEVALUTIONS FROM 1979-1993: number of devaluations that a country that belonged to the European Monetary System did from 1979 to 1993. See also the Notes to Table 1 and Appendix for the exact definition of the variables.…”

Section: Why Should the Euro Matter? Empirical Evidencementioning

confidence: 99%

“…Our idea is that only countries that de facto used the exchange rate as a tool to regain competitiveness should suffer from its loss and liberalize markets. The variable N. OF DEVALUATIONS FROM 1979-1993 is equal to 5 for France, 1 for Belgium, 7 for Italy and 3 for Ireland. It is equal to 0 otherwise.…”

Section: Why Should the Euro Matter? Empirical Evidencementioning

confidence: 99%

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The Euro and Structural Reforms

Alesina

Ardagna

Galasso

2010

Review of Economics and Institutions

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This paper investigates whether or not the adoption of the Euro has facilitated the introduction of structural reforms, defined as deregulation in the product markets and liberalization and deregulation in the labor markets. After reviewing the theoretical arguments that may link the adoption of the Euro and structural reforms, we investigate the empirical evidence. We find that the adoption of the Euro has been associated with an acceleration of the pace of structural reforms in the product market. The adoption of the euro does not seem to have accelerated labor market reforms in the "primary labor market"; however, the run up to the Euro adoption seems to have been accompanied by wage moderation. We also investigate issues concerning the sequencing of goods and labor market reforms.JEL classification: E63, J41,L51

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Section: The Data On Regulationmentioning

confidence: 99%

Section: Why Should the Euro Matter? Empirical Evidencementioning

confidence: 99%

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The Euro and Structural Reforms

Alesina

Ardagna

Galasso

2010

Review of Economics and Institutions

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“…Since economic agents probably realized that the same was not true for chronic inflation countries, high inflation took longer to be eliminated there. 17 The models of Alesina and Drazen (1991) and Drazen and Grilli (1993) may also help explain why the lags in adjustments have been larger in chronic inflation countries. Since inflation was much higher during hyperinflations, the costs of delaying stabilization were also much higher, 17 I owe this rationale to an anonymous referee.…”

Section: Political Factors Behind Budget Deficitsmentioning

confidence: 99%

“…Ideological polarization, political fragmentation, lower costs of inflation, and greater dispersion of income across interest groups can delay fiscal stabilization. Drazen and Grilli (1993) extend this model emphasizing the possible benefits of economic crises. Since higher costs of delay hasten stabilizations, a crisis may be welfare improving if its welfare costs are more than compensated for by the benefits of earlier stabilization.…”

Section: Political Factors Behind Budget Deficitsmentioning

confidence: 99%

What causes the failure of inflation stabilization plans?

Veiga

1999

Journal of International Money and Finance

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Abstract:The paper discusses the causes of failure of inflation stabilization plans. Following a description of stylized facts of inflation stabilization, a model of Balance of Payments crises is presented, highlighting some of the main factors leading to the collapse of stabilizations. Empirical results obtained when estimating a binary probit model over a panel of 34 stabilizations identify real exchange rate appreciation, lack of foreign reserves, and government budget deficits as the main causes of failure of inflation stabilization plans. This is consistent with the model presented in this paper, with the stylized facts of stabilizations, and with some of the models found in the literature.

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Macroeconomic populism: A formal representation and a suggested interpretation of the Peruvian experience (1985–90)

Checchi

1996

J. Int. Dev.

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This paper investigates some reasons for the recurrence of populist governments. When a populist experience is viewed as a political compensation for economic inequalities, the analysis of the emergence of populist government must focus on the interplay of economic and political determinants. A political-economic model with three social groups and three candidates is proposed. It explains the emergence of populist candidates as the result of the existence of a wide informal sector in a polarized society, where pro-labour and pro-capital candidates pursue the exclusive interests of their constituencies. The conditions that make the elections of a populist candidate more likely include the size of the informal sector, the electoral rules, the polarization of the political conflict between left and right and the permanence of the informal sector, notwithstanding past populist experiences. A brief historical outline of Alan Garcia's government in Peru (1985-90) shows that the existence of a wide informal sector in the economy was one of the key features for his electoral platform, for his election and for the theoretical justification of the 'heterodox' policies he implemented.

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The Benefits of Crises for Economic Reforms

Cited by 282 publications

References 4 publications

The Euro and Structural Reforms

The Euro and Structural Reforms

What causes the failure of inflation stabilization plans?

Macroeconomic populism: A formal representation and a suggested interpretation of the Peruvian experience (1985–90)

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