| I present a political economy explanation for the implementation of temporary policies. From a representative-agent point of view, temporary policies are not necessarily welfare improving because they distort intertemporal choices. To understand why governments often undertake short-lived policies, I depart from models in which policy making is viewed as the optimal outcome of a social planner who wishes to maximize the welfare of the representative agent. Heterogeneity in the population and the distributional consequences of policies are crucial to understanding why temporary policies are implemented. In particular, I have studied two specific examples: temporary capital liberalization policies observed across countries and across time, for which I have centered on the distributional effects of capital flows; and short-lived exchange-rate-based (where the exchange rate is used as a nominal anchor) stabilization programs in Latin America. In this case, I focused on the effects of real exchange rate appreciation. |
