Realigning Interests

Why do currency crises happen? What conditions set the stage for such a crisis? How severe will it be? When will it happen? This book answers these questions, illustrating the points by examining the exchange rate realignments of the European Monetary System. It also shows how balancing the tension between domestic and international politics plays a vital part in a government's willingness to uphold its exchange rate commitments. Michele Chang pays particular attention to the role of domestic elections, since these may prevent governments from credibly committing to a fixed exchange rate and from responding quickly and coherently to market instability, thus encouraging speculation.

"The financial crises of the last decade - from Latin America, to Asia and Russia - frequently had political roots. Prof. Michele Chang's careful analysis of the European integration process shows that such factors were at work there as well. In particular, she shows how elections play a powerful role in exchange rate policy. The lessons for emerging markets - where democracy is expanding - are clear and important."

- Stephan Haggard, Professor, Graduate School of International Relations and Pacific Studies, University of California, San Diego

"This book is a valuable contribution to the literature on currency crises, stressing the critical role of elections and political instability in determining the timing and resolution of crises. Well written and creative, the carefully structured analysis demonstrates a mastery of both empirical detail and theoretical understanding. Chang's insights offer much of interest to economists and political scientists alike."

- Benjamin J. Cohen, Benjamin Jerry Cohen, Department of Political Science, University of California, Santa Barbara

"In Realigning Interests, Michele Chang presents a careful analysis of the political economy of exchange rate policy. Chang uses an effective combination of statistical evidence and country studies of France, Italy, and Ireland, to demonstrate how political variables impinge upon foreign exchange markets. Realigning Interests is a valuable contribution to our understanding of the complex interaction of markets and politics, especially currency markets and electoral politics. "

- Jeff Frieden, Professor of Government, Harvard University

MICHELE CHANG teaches political Science at Colgate University, USA, and is a Fellow at Cornell University's Institute for European Studies. She has received fellowships from the Institute on Global Conflict and Cooperation and the Deutscher Akademischer Austausch Dienst. She has previously published in the Journal of Public Policy as well as with Cornell University Press.