The behavior of the nominal exchange rate (NER) is regularly reported and commented on in Colombian newspapers, editorials, and op-eds. However, the number and flavor of the news and commentary seem to increase disproportionately during revaluation in contrast to periods of devaluation.1 During the course of a revaluation, it is common to read claims (not facts) in the press of firms and entire industries in distress owing to revaluation and arguments about the benefits of outdated policies such as fixed and multiple exchange rates—implemented after 1967 with the enactment of Law 444 (Congreso de Colombia 1967)—if not a dollarization of the economy.2 [End Page 103]
On one hand, many news articles and op-ed pieces often maintain that revaluation is devastating for the macroeconomic performance of the country owing to the reduced income for exporters and holders of foreign debt and the subsequent effects on the employment and wages of workers in related industries. On the other hand, when devaluation occurs, little attention is paid in news, editorials, or op-eds. There are no complaints addressing the plausible effects of a devaluation, such as inflation from higher prices of foreign capital (machinery and equipment) or imported raw materials.
This asymmetry in media reporting is hard to understand. Why would revaluation be more important to report and discuss than devaluation? Why are there claims of the benefits of a fixed exchange rate when the country has already gone through the crippling effects of an exchange rate black-market premium? Easterly (2002, p. 222), describes a high black-market premium as “a punitive tax on exporters—not a good incentive for growth.” Finally, why, after almost twenty years of experience with a market-determined nominal exchange rate, is revaluation still reported as harmful for the economy, even though there have been more devaluation episodes than revaluation ones?3 One answer to these questions lies in media bias in reporting the behavior of the NER.
The existence of an interest group supplying media outlets with news to increase the awareness of readers and government officials of the catastrophic consequences of revaluation is considered. When this is the case, the media benefit from a larger audience and subsequent higher income, from advertising revenues. The interest group’s goal is further satisfied when the fiscal authority offers subsidies or the monetary authority intervenes in the exchange rate market. When a government-related institution steps in to tame the expressions of discomfort, it fulfills the goal of increasing political affection and public acceptance.
There is a growing literature on the economics of media bias and media slant. Gentzkow and Shapiro (2008) and Larcinese, Puglisi, and Snyder (2011) offer a review of the theoretical and empirical approaches to this topic. The literature describes both supply- and demand-side models. On the supply side, the distortions of the news, its relationship with the private sector, and the government capture of media are the core subjects. On the demand side, the distortion comes from the public and its preference for news with a certain bias or slant and the media competition for their attention. The empirical evidence [End Page 104] of media bias shown in this paper fits into the supply-side models and the idea of media “capture” not by the government but by an interest group. Specifically, the work of Corneo (2006) is an appropriate analytic framework for the alleged sources of media bias and slant in this paper.
Corneo (2006) builds a voting model of media capture at the hands of special interests. To begin with, the interest group, looking for a policy that will favor its current status, seeks to form a coalition with the media. The media can accept or refuse the formation of a coalition. When they do refuse, media demonstrate their independence and commitment to honest reporting. When they accept, media show their commitment to forwarding the interest group’s view. Citizens to a large degree get their information from media. If media has formed a coalition with an interest group, citizens are likely to vote in favor of a policy...