Macroeconomic Implications of Real Exchange Rate Targeting in Developing Countries PDF Download

Author: Peter J. Montiel
Publisher:
ISBN:
Category : Developing countries
Languages : en
Pages : 54

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Author: Peter Montiel
Publisher:
ISBN:
Category : Foreign exchange rates
Languages : en
Pages : 24

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Author: Mr.Marco Airaudo
Publisher: International Monetary Fund
ISBN: 1475523165
Category : Business & Economics
Languages : en
Pages : 65

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We analyze coordination of monetary and exchange rate policy in a two-sector model of a small open economy featuring imperfect substitution between domestic and foreign financial assets. Our central finding is that management of the exchange rate greatly enhances the efficacy of inflation targeting. In a flexible exchange rate system, inflation targeting incurs a high risk of indeterminacy where macroeconomic fluctuations can be driven by self-fulfilling expectations. Moreover, small inflation shocks may escalate into much larger increases in inflation ex post. Both problems disappear when the central bank leans heavily against the wind in a managed float.

Author: P. J. Montiel
Publisher:
ISBN:
Category :
Languages : en
Pages :

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Author: Peter J. Montiel
Publisher:
ISBN:
Category :
Languages : en
Pages : 49

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This paper analyzes the macroeconomic effects of a variety of exogenous and policy-induced real disturbances when the authorities target the level of the real exchange rate. It first discusses the implications particularly for inflation and the current account of targeting the rate at an quot;overdepreciatedquot; level. The paper then examines the dynamic response of both output and inflation to a number of shocks. Further applications of the model, particularly as regards fiscal explanations of inflation, high-inflation plateaus, and money-based stabilization programs, are also considered.

Author: Mr.Peter Montiel
Publisher: INTERNATIONAL MONETARY FUND
ISBN: 9781451844702
Category : Business & Economics
Languages : en
Pages : 0

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Book Description
This paper analyzes the macroeconomic effects of a variety of exogenous and policy-induced real disturbances when the authorities target the level of the real exchange rate. It first discusses the implications--particularly for inflation and the current account--of targeting the rate at an “overdepreciated” level. The paper then examines the dynamic response of both output and inflation to a number of shocks. Further applications of the model, particularly as regards fiscal explanations of inflation, high-inflation plateaus, and money-based stabilization programs, are also considered.

Author: Mr.Guillermo Calvo
Publisher: International Monetary Fund
ISBN: 1451921217
Category : Business & Economics
Languages : en
Pages : 50

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This paper presents a theoretical and empirical analysis of policies aimed at setting a more depreciated level of the real exchange rate. An intertemporal optimizing model suggests that, in the absence of changes in fiscal policy, a more depreciated level of the real exchange can only be attained temporarily. This can be achieved by means of higher inflation and/or higher real interest rates, depending on the degree of capital mobility. Evidence for Brazil, Chile, and Colombia supports the model’s prediction that undervalued real exchange rates are associated with higher inflation.

Author: Pierre-Richard Agénor
Publisher: International Monetary Fund
ISBN: 1451850921
Category : Business & Economics
Languages : en
Pages : 43

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The paper examines the role of credibility in the conduct of exchange rate policy in developing countries, The analysis is based on a model in which policymakers are concerned about inflation and external competitiveness. Price setters in the nontraded goods sector of the economy adjust prices in reaction to anticipated fluctuations in the domestic price of tradable goods. This type of model is showm to generate a “devaluation bias” which undermines the credibility of a fixed exchange rate. The effect of reputational factors, signaling considerations, and joining a currency union as possible solutions to this bias is examined.

Author: Bijan B. Aghevli
Publisher: World Bank Publications
ISBN:
Category : Foreign exchange administration
Languages : en
Pages : 50

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Book Description
This paper addresses analytical aspects of exchange rate policy and emphasizes the relationship among exchange rate flexibility, financial discipline, and international competitiveness.

Author: Sebastian Edwards
Publisher: University of Chicago Press
ISBN: 0226184730
Category : Business & Economics
Languages : en
Pages : 460

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Book Description
In spite of the attention paid exchange rates in recent economic debates on developing countries, relatively few studies have systematically analyzed in detail the various ramifications of exchange rate policy in these countries. In this new volume from the National Bureau of Economic Research, leading economists use rigorous models to tackle various exchange rate issues, while also illuminating policy implications that emerge from their analyses. The volume, divided into four main sections, addresses: the role of exchange rates in stabilization programs and the adjustment process; the importance of exchange rate policy during liberalization reform in developing countries; exchange rate problems relevant and unique to developing countries, illustrated by case studies; and the problems defining, measuring, and identifying determinants of real exchange rates. Authors of individual papers examine the relation between commercial policies and exchange rates, the role of exchange rate policy in stabilization programs, the effectiveness of devaluations as a policy tool, and the interaction between exchange rate terms of trade an capital flow. This research will not only prove crucial to our understanding of the role of exchange rates in developing countries, but will clearly set the standard for future work in the field.