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On Credible Disinflation

We study the effects of a credible, gradual exchange rate based disinflation program in a two sector economy. After an initial real exchange rate depreciation, the reductions in the rate of devaluation reduce the monetary wedge generated by a cash in advance constraint, leading to a gradual increase...

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Bibliographic Details
Main Author: Roldos, Jorge
Format: eBook
Language:English
Published: Washington, D.C. International Monetary Fund 1993
Series:IMF Working Papers
Subjects:
Inflation
Wealth
Economics
Labour
Saving
Deflation
Open Economy Macroeconomics
Currency
Disinflation
Demand And Supply Of Labor: General
National Accounts
Labor
Labor Supply
Price Level
Foreign Exchange
Consumption
Labor Market
Prices
Macroeconomics
Macroeconomics: Consumption
Real Exchange Rates
Income Economics
United States
Online Access:
Collection: International Monetary Fund - Collection details see MPG.ReNa
Description
Summary:We study the effects of a credible, gradual exchange rate based disinflation program in a two sector economy. After an initial real exchange rate depreciation, the reductions in the rate of devaluation reduce the monetary wedge generated by a cash in advance constraint, leading to a gradual increase in absorption that yields progressive real exchange rate appreciations and current account deficits. An initial boom in economic activity is not followed by a later contraction, as labor supply expands during the whole length of the program
Physical Description:26 pages
ISBN:9781451851342

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