Macroeconomic Implications of Real Exchange Rate Targeting in Developing Countries

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.
Publication date: March 1991
ISBN: 9781451844702
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Inflation , Money and Monetary Policy , exchange rate , real exchange rate , terms of trade , rate of inflation

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