Exchange Rate Pass-Through in Spain
This paper examines the factors underlying the stability of inflation observed following devaluations of the Spanish peseta, which took place during the 1992-93 Exchange Rate Mechanism (ERM) crisis. The long-run equilibrium relationships between the exchange rate and the aggregate price indices are...
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| Format: | eBook |
| Language: | English |
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Washington, D.C.
International Monetary Fund
1996
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| Series: | IMF Working Papers
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| Collection: | International Monetary Fund - Collection details see MPG.ReNa |
| Summary: | This paper examines the factors underlying the stability of inflation observed following devaluations of the Spanish peseta, which took place during the 1992-93 Exchange Rate Mechanism (ERM) crisis. The long-run equilibrium relationships between the exchange rate and the aggregate price indices are estimated using the Johansen maximum likelihood-method. The short-run dynamics are obtained from error-correction models. The model is then simulated by calibrating changes in the exogenous variables to their actual values. The results indicate that the cost-push-up effect of devaluations may have been completely offset by determinants of the cyclical position of the economy and the low inflation rate in 1993-94 should not be viewed as unusual |
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| Physical Description: | 32 pages |
| ISBN: | 9781451943412 |