1 1 Policy Choices in Tough Times: The case of democratization and currency defense Byunghwan Son Assistant Professor of Global Affairs George Mason University 4400 University Dr. 6B4 Fairfax VA22030 bson3(at)gmu(dot)edu Phone: 703-993-9185 | Fax: 703-993-1244 2015 (working paper version) Word Count: 7622 (excluding the online appendix) FORTHCOMING AT INTERNATIONAL POLITICAL SCIENCE REVIEW Abstract Do policymakers under financial and political distresses make otherwise undesirable policy choices? This paper attempts to answer this question by studying the relationship between democratization and currency devaluation under speculative pressures. The central argument is that leaders of young democracies lack policy credibility and instead engage in clientelistic politics. The empirical expectation based on this argument is that young democracies, when compared to autocracies and established democracies, exhibit high chances of succumbing to speculative attacks as the political cost of economic adjustment needed for defense is relatively high to these nascent regimes. The paper further contends that this relationship holds stronger when the regime can mobilize less resources to defend their currencies. To test these arguments, I use monthly data for 117 countries from 1977 to 2006. The results from statistical models provide corroborative evidence for this argument. Previous versions of this paper were presented at MPSA 2012 and ISA 2012. I thank Menna Bizuneh, Jonathan Krieckhaus, Stormy-Annika Mildner, David Steinberg, and Thomas Pepinsky for extremely helpful comments.