POLITICAL CYCLES/STABILIZATION 47 terest groups and coalitions in both advanced industrial and developing economies.8 Similarly,another line of research has also emphasized domestic conditions,although stressing the way politicians respond to the insti- tutional configuration of the polity rather than to interest-group poli- tics.Accordingly,Simmons argues that weak or unstable governments will be unable to implement the domestic adjustments needed to sus- tain a fixed exchange-rate regime.This line of argument was more re- cently picked up and extended by Bernhard and Leblang.They see weakness as very much a function of electoral rules and legislative insti- tutions.In systems where the cost of electoral defeat is high(majority rule)and the electoral calendar is exogenous(usually presidentialism), they argue that politicians will prefer a flexible exchange rate arrange- ment,desiring to retain the ability to manipulate monetary policy in- struments for political gain.Moreover,in extending the argument to developing countries,Leblang argues that,largely for these reasons, floating exchange rate regimes are more likely to occur in democratic than in nondemocratic polities.1 In addition to the desire to retain control of monetary policy for political business-cycle purposes, Leblang argues that increased pressure for distributive and expansion- ary policy accompanies democracy,providing policymakers with an- other motive to prefer foating to fixed exchange rates. Even though we agree with the primacy attributed to the politician's choice in this recent literature,the reasoning is at odds with our argu- ment.First,it rules out the possibility that the adoption of a fixed exchange rate becomes itself a source of strength for an unstable gov- ernment,helping it build political capital during the boom phase.In the case of exchange rate-based stabilizations,adoption of a nominal anchor itself is a policy tool for engineering an upswing in the business sFor the former,see Jeffry Frieden,"Exchange Rate Politics:Contemporary Lessons from Ameri- can History,"Review of International Political Economy 1(Spring 1994);Geoffrey Garrett and Peter Lange,"Internationalization,Institutions,and Political Change,"in Keohane and Milner(fn.7).For the latter,see Jeffry Frieden,"The Politics of Exchange Rates,"in Sebastian Edwards and Moises Naim,eds.,Mexico 1994:Anatomy of an Emerging Market Crash (Washington,D.C.:Carnegie En- dowment for International Peace,1997);Eugenio Diaz-Bonilla and Hector E.Schamis,"From Re- distribution to Stability:The Evolution of Exchange Rate Policies in Argentina,1950-98,"in Jeffry Frieden and Emesto Stein,eds.,The Currency Game:Excbange Rate Politics in Latin America(Balti- more:Johns Hopkins University Press,2001). Beth Simmons,Who Adjusts?Domestic Sources of Foreign Economic Policy during the Interwar Years (Princeton:Princeton University Press,1994). 10William Bernhard and David Leblang,"Democratic Institutions and Exchange Rate Commit- ments,"International Organization 53 (Winter 1999). David Leblang,"Domestic Political Institutions and Exchange Rate Commitments in the Devel- oping World,"International Studies Quarterly 43(December 1999).terest groups and coalitions in both advanced industrial and developing economies.8 Similarly, another line of research has also emphasized domestic conditions, although stressing the way politicians respond to the insti￾tutional configuration of the polity rather than to interest-group poli￾tics. Accordingly, Simmons argues that weak or unstable governments will be unable to implement the domestic adjustments needed to sus￾tain a fixed exchange-rate regime.9 This line of argument was more re￾cently picked up and extended by Bernhard and Leblang.10 They see weakness as very much a function of electoral rules and legislative insti￾tutions. In systems where the cost of electoral defeat is high (majority rule) and the electoral calendar is exogenous (usually presidentialism), they argue that politicians will prefer a flexible exchange rate arrange￾ment, desiring to retain the ability to manipulate monetary policy in￾struments for political gain. Moreover, in extending the argument to developing countries, Leblang argues that, largely for these reasons, floating exchange rate regimes are more likely to occur in democratic than in nondemocratic polities.11 In addition to the desire to retain control of monetary policy for political business-cycle purposes, Leblang argues that increased pressure for distributive and expansion￾ary policy accompanies democracy, providing policymakers with an￾other motive to prefer floating to fixed exchange rates. Even though we agree with the primacy attributed to the politician’s choice in this recent literature, the reasoning is at odds with our argu￾ment. First, it rules out the possibility that the adoption of a fixed exchange rate becomes itself a source of strength for an unstable gov￾ernment, helping it build political capital during the boom phase. In the case of exchange rate–based stabilizations, adoption of a nominal anchor itself is a policy tool for engineering an upswing in the business POLITICAL CYCLES/STABILIZATION 47 8For the former, see Jeffry Frieden, “Exchange Rate Politics: Contemporary Lessons from Ameri￾can History,” Review of International Political Economy 1 (Spring 1994); Geoffrey Garrett and Peter Lange, “Internationalization, Institutions, and Political Change,” in Keohane and Milner (fn. 7). For the latter, see Jeffry Frieden, “The Politics of Exchange Rates,” in Sebastian Edwards and Moises Naim, eds., Mexico 1994: Anatomy of an Emerging Market Crash (Washington, D.C.: Carnegie En￾dowment for International Peace, 1997); Eugenio Diaz-Bonilla and Hector E. Schamis, “From Re￾distribution to Stability: The Evolution of Exchange Rate Policies in Argentina, 1950–98,” in Jeffry Frieden and Ernesto Stein, eds., The Currency Game: Exchange Rate Politics in Latin America (Balti￾more: Johns Hopkins University Press, 2001). 9Beth Simmons, Who Adjusts? Domestic Sources of Foreign Economic Policy during the Interwar Years (Princeton: Princeton University Press, 1994). 10William Bernhard and David Leblang, “Democratic Institutions and Exchange Rate Commit￾ments,” International Organization 53 (Winter 1999). 11David Leblang, “Domestic Political Institutions and Exchange Rate Commitments in the Devel￾oping World,” International Studies Quarterly 43 (December 1999). v56.1.043.schamis 3/2/04 4:29 PM Page 47