Devaluation Crises and the Macroeconomic Consequences of Postponed Adjustment in Developing Countries
This paper develops a small analytical model to explore the relationship between the dynamics of macroeconomic adjustment and the timing of the implementation of an adjustment program featuring a nominal devaluation. The effects of postponing adjustment depend on the source of the original shock. In...
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Format: | eBook |
Language: | English |
Published: |
Washington, D.C.
International Monetary Fund
1989
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Series: | IMF Working Papers
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Online Access: | |
Collection: | International Monetary Fund - Collection details see MPG.ReNa |
Summary: | This paper develops a small analytical model to explore the relationship between the dynamics of macroeconomic adjustment and the timing of the implementation of an adjustment program featuring a nominal devaluation. The effects of postponing adjustment depend on the source of the original shock. In the case of a fiscal expansion, postponement implies a larger eventual devaluation and greater deviations of macroeconomic variables from their steady-state values. For adverse terms of trade shocks, postponement does not affect the size of the eventual devaluation, but does magnify the degree of post-devaluation overshooting by key macroeconomic variables |
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Physical Description: | 38 pages |
ISBN: | 9781451925845 |