Real Effects of Exchange Rate-Based Stabilization: An Analysis of Competing Theories

60 Pages Posted: 13 Jul 2000 Last revised: 23 Sep 2010

See all articles by Sergio T. Rebelo

Sergio T. Rebelo

Northwestern University - Kellogg School of Management; Centre for Economic Policy Research (CEPR); National Bureau of Economic Research (NBER)

Carlos A. Vegh

Johns Hopkins University - Paul H. Nitze School of Advanced International Studies (SAIS); University of Maryland - Department of Economics; University of California at Los Angeles; National Bureau of Economic Research (NBER)

Date Written: July 1995

Abstract

This paper uses a unified analytical framework to assess, both qualitatively and quantitatively, the relevance of the different hypotheses that have been proposed to explain the real effects of exchange rate-based stabilizations. The four major hypotheses analyzed are: (i) the supply-side effects associated with an inflation decline; (ii) the perception that the exchange rate peg is temporary; (iii) the fiscal adjustments that tend to accompany the peg; and (iv) the existence of nominal rigidities in wages or prices.

Suggested Citation

Tavares Rebelo, Sergio and Vegh, Carlos A., Real Effects of Exchange Rate-Based Stabilization: An Analysis of Competing Theories (July 1995). NBER Working Paper No. w5197. Available at SSRN: https://ssrn.com/abstract=225260

Sergio Tavares Rebelo (Contact Author)

Northwestern University - Kellogg School of Management ( email )

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Carlos A. Vegh

Johns Hopkins University - Paul H. Nitze School of Advanced International Studies (SAIS) ( email )

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University of Maryland - Department of Economics ( email )

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National Bureau of Economic Research (NBER)

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