Contractionary Devaluation in Developing Countries: An Analytical Overview

56 Pages Posted: 15 Feb 2006

See all articles by J. Saul Lizondo

J. Saul Lizondo

affiliation not provided to SSRN

Peter J. Montiel

Williams College - Department of Economics

Date Written: June 29, 1988

Abstract

This paper evaluates the growing literature on whether devaluation has contractionary effects on output in developing countries. It explores the nature of the links between the exchange rate and real output within a unified, fairly general analytical framework which incorporates a number of the developing-country features cited in this literature. The analysis suggests that many of the arguments on both sides of the contractionary devaluation debate require modification and that a number of potential effects have been ignored. It is concluded that the direction of the impact effects of devaluation on real output is ambiguous on analytical grounds.

JEL Classification: 131, 431

Suggested Citation

Lizondo, J. Saul and Montiel, Peter J., Contractionary Devaluation in Developing Countries: An Analytical Overview (June 29, 1988). IMF Working Paper No. 88/51, Available at SSRN: https://ssrn.com/abstract=884824

J. Saul Lizondo (Contact Author)

affiliation not provided to SSRN

No Address Available

Peter J. Montiel

Williams College - Department of Economics ( email )

Fernald House
Office: Fernald 14
Williamstown, MA 01267
United States
413-597-2103 (Phone)
413-597-4045 (Fax)

HOME PAGE: http://www.williams.edu/Economics/faculty/montiel.htm

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