Credibility in Stabilization Programs
{'Code': '04050100', 'Directorate': {'Abbreviation': 'SBE', 'LongName': 'Direct For Social, Behav & Economic Scie'}, 'Division': {'Abbreviation': 'SES', 'LongName': 'Divn Of Social and Economic Sciences'}}
{'SignBlockName': 'Daniel H. Newlon', 'PO_EMAI': None, 'PO_PHON': None}
This project focuses on the credibility of stabilization                        programs. Its main objective is to develop and test a positive                  theory of stabilization.  Governments face uncertainty about the                effectiveness of the measures they initiate in a stabilization                  program and about variables whose realization,  subsequent to                   stabilization,  will affect the viability of their program.  They               choose a program that selects the preferred tradeoff between the                costs of program failure and the costs of adjustment that make a                collapse less likely.  A model along these lines establishes an                 ex ante optimal probability of program success as a function of                 structural characteristics of the stabilizing country.                          Specifically,  a program is more likely to succeed the higher                   the reserve levels and the responsiveness of the economy to                     adjustment measures.  A program is less likely to succeed the                   higher the marginal (political) cost of adjustment,  the more                   prevalent the capital flight,  and the higher the variance of                   foreign exchange flows.  The plan is to test a model along these                lines by studying a wide range of stabilization programs.  In                   addition,  three related questions will be addressed: (1) the                   liquidity premium required to induce a return of capital flightin               the aftermath of a stabilization will be modelled (2) a model of                the phenomenon of high realized real interest rates in the post-                stabilization phase will be developed (3)  a model will be built                and tested of the large decline of long-term interest rates in                  high- debt European economies,  specifically, Ireland.                                                                                                          The principal substantive point to be made about credibility is                 that governments cannot create facts (policies) that are set once               and forever, immutably.  Any program can be undone (with more or                less difficulty) by the next government.  Moreover, even a well-                designed program may not be sturdy enough to withstand shocks                   such as a major,  unexpected terms of trade deterioration.  Thus                credibility is a relative term and there is a need for a theory                 to capture how the public forms a judgment about it and how that                judgment possibly interacts with the credibility.  In turn,  the                development of a successful model of credibility,  will depend on               an understanding of the underlying reasons for the failure of                   stabilization programs.
{'FirstName': 'Rudiger', 'LastName': 'Dornbusch', 'PI_MID_INIT': None, 'PI_SUFX_NAME': None, 'PI_FULL_NAME': 'Rudiger Dornbusch', 'EmailAddress': None, 'NSF_ID': '000310274', 'StartDate': '07/01/1989', 'EndDate': None, 'RoleCode': 'Principal Investigator'}
{'Name': 'National Bureau of Economic Research Inc', 'CityName': 'CAMBRIDGE', 'ZipCode': '021385359', 'PhoneNumber': '6178683900', 'StreetAddress': '1050 MASSACHUSETTS AVE', 'StreetAddress2': None, 'CountryName': 'United States', 'StateName': 'Massachusetts', 'StateCode': 'MA', 'CONGRESSDISTRICT': '05', 'CONGRESS_DISTRICT_ORG': 'MA05', 'ORG_UEI_NUM': 'GT28BRBA2Q49', 'ORG_LGL_BUS_NAME': 'NATIONAL BUREAU OF ECONOMIC RESEARCH INC', 'ORG_PRNT_UEI_NUM': None}
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{'Code': '1320', 'Text': 'Economics'}
{'url': 'https://www.nsf.gov/awardsearch/download?DownloadFileName=1988&All=true', 'xml': '8821685.xml'}