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Wealth Redistribution after Exchange Rate Devaluations

Author

Listed:
  • Andres Drenik
  • Gustavo Pereira
  • Diego J. Perez

Abstract

We document that the likelihood of having assets in foreign currency is increasing in households' income within many emerging economies. This pattern leads to heterogeneous exposures of wealth to exchange rate movements. We analyze the redistribution of liquid wealth across households after nominal exchange rate devaluations due to the revaluation of nominal net wealth denominated in different currencies. We find that there is an important degree of redistribution from households with low income to those with high income.

Suggested Citation

  • Andres Drenik & Gustavo Pereira & Diego J. Perez, 2018. "Wealth Redistribution after Exchange Rate Devaluations," AEA Papers and Proceedings, American Economic Association, vol. 108, pages 552-556, May.
    • Handle: RePEc:aea:apandp:v:108:y:2018:p:552-56
    Note: DOI: 10.1257/pandp.20181070
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    Citations

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    Cited by:

    1. Drenik, Andrés & Perez, Diego J., 2021. "Domestic price dollarization in emerging economies," Journal of Monetary Economics, Elsevier, vol. 122(C), pages 38-55.
    2. Xing Guo & Pablo Ottonello & Diego J. Perez, 2023. "Monetary Policy and Redistribution in Open Economies," Journal of Political Economy Macroeconomics, University of Chicago Press, vol. 1(1), pages 191-241.
    3. Rivero Wildemauwe, José Ignacio & Sanroman, Graciela, 2022. "Household debt and debt to income: The role of business ownership," The Quarterly Review of Economics and Finance, Elsevier, vol. 83(C), pages 52-68.
    4. Gyöngyösi, Győző & Rariga, Judit & Verner, Emil, 2021. "The anatomy of consumption in a household foreign currency debt crisis," SAFE Working Paper Series 332, Leibniz Institute for Financial Research SAFE.
    5. Oskolkov, Aleksei, 2023. "Exchange rate policy and heterogeneity in small open economies," Journal of International Economics, Elsevier, vol. 142(C).
    6. Francesco Ferrante & Nils M. Gornemann, 2022. "Devaluations, Deposit Dollarization, and Household Heterogeneity," International Finance Discussion Papers 1336, Board of Governors of the Federal Reserve System (U.S.).
    7. Zhandos Ybrayev, 2022. "Distributional Consequences of Monetary Policy in Emerging Economies: Dollarization, Domestic Inflation, and Income Divergence," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 64(2), pages 186-210, June.

    More about this item

    JEL classification:

    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • O19 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - International Linkages to Development; Role of International Organizations

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