IDEAS home Printed from https://ideas.repec.org/a/eej/eeconj/v14y1988i2p181-187.html
   My bibliography  Save this article

Exchange Rate Devaluation: A Monetary Model and Empirical Investigation

Author

Listed:
  • Parviz Asheghian
  • William G. Foote

Abstract

This paper uses a monetary approach to examine the impact of change s in the exchange rate, domestic credit, and gros s domestic product on the balance of payments during devaluation episodes of less develope d countries (LDCs) and advanced countries (ACs). Second, it estimates t he relative responsiveness of LDCs and ACs to devaluation. Using a sampl e of twenty-three independent devaluations in LDCs and thirteen independent devaluations in ACs, the analysis suggests several conclusions, two of which are: in the long run, devaluation improves the balance of payments for both ACs and LDCs; and the data cannot corroborate any structural differences between the relative responsiv eness of ACs and LDCs to devaluation in the short run.

Suggested Citation

  • Parviz Asheghian & William G. Foote, 1988. "Exchange Rate Devaluation: A Monetary Model and Empirical Investigation," Eastern Economic Journal, Eastern Economic Association, vol. 14(2), pages 181-187, Apr-Jun.
    • Handle: RePEc:eej:eeconj:v:14:y:1988:i:2:p:181-187
    as

    Download full text from publisher

    File URL: http://web.holycross.edu/RePEc/eej/Archive/Volume14/V14N2P181_187.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Helpman, Elhanan, 1976. "Macroeconomic Policy in a Model of International Trade with a Wage Restriction," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 17(2), pages 262-277, June.
    2. Dornbusch, Rudiger, 1973. "Currency Depreciation, Hoarding, and Relative Prices," Journal of Political Economy, University of Chicago Press, vol. 81(4), pages 893-915, July-Aug..
    3. Jonson, P D & Kierzkowski, H I, 1975. "The Balance of Payments: An Analytic Exercise," The Manchester School of Economic & Social Studies, University of Manchester, vol. 43(2), pages 105-133, June.
    4. Richard K. Anderson & Akira Takayama, 1977. "Devaluation, the Specie Flow Mechanism and the Steady State," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 44(2), pages 347-361.
    5. Connolly, Michael & Taylor, Dean, 1976. "Testing the Monetary Approach to Devaluation in Developing Countries," Journal of Political Economy, University of Chicago Press, vol. 84(4), pages 849-859, August.
    6. Thorvaldur Gylfason & Michael Schmid, 1983. "Does Devaluation Cause Stagflation?," Canadian Journal of Economics, Canadian Economics Association, vol. 16(4), pages 641-654, November.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Parviz Asheghian & William G. Foote & Reza Saidi, 1991. "Determinants of LDC Devaluation Decisions: An Exploratory Investigation of Devaluation in Brazil," Eastern Economic Journal, Eastern Economic Association, vol. 17(4), pages 491-497, Oct-Dec.
    2. Frenkel, Jacob A. & Mussa, Michael L., 1985. "Asset markets, exchange rates and the balance of payments," Handbook of International Economics, in: R. W. Jones & P. B. Kenen (ed.), Handbook of International Economics, edition 1, volume 2, chapter 14, pages 679-747, Elsevier.
    3. repec:ilo:ilowps:234932 is not listed on IDEAS
    4. Ghani E., 1984. "Effects of devaluation on employment and poverty in developing countries," ILO Working Papers 992349323402676, International Labour Organization.
    5. George Darko & Richard Dusansky & Pankaj Maskara & Nadeem Naqvi, 2006. "The gains from trade in a small monetary economy," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 15(4), pages 403-430.
    6. Choi, Yoonho & Choi, E. Kwan, 2018. "Unemployment and optimal exchange rate in an open economy," Economic Modelling, Elsevier, vol. 69(C), pages 82-90.
    7. Jin, Hailong & Choi, Yoonho & Kwan Choi, E., 2016. "Unemployment and optimal currency intervention in an open economy," International Review of Economics & Finance, Elsevier, vol. 41(C), pages 253-261.
    8. Godwin Chukwudum Nwaobi, 2003. "The Balance Of Payments As A Monetary Phenomenon:An Econometric Case Study Of Nigeria," International Finance 0307001, University Library of Munich, Germany.
    9. Vivien Lévy-Garboua & Bruno Weymuller, 1979. "Le taux de change à long terme : les enseignements des modèles," Revue Économique, Programme National Persée, vol. 30(4), pages 676-718.
    10. An, Lian & Kim, Gil & Ren, Xiaomei, 2014. "Is devaluation expansionary or contractionary: Evidence based on vector autoregression with sign restrictions," Journal of Asian Economics, Elsevier, vol. 34(C), pages 27-41.
    11. Soriano, Ma. Cecilia G., 1990. "Classifying the Economy into Traded or Nontraded Sectors," Philippine Journal of Development JPD 1990 Vol. XVII No. 2-, Philippine Institute for Development Studies.
    12. Chung‐Hua Shen & Hsing‐Hua Hsu, 2022. "The determinants of Asian banking crises—Application of the panel threshold logit model," International Review of Finance, International Review of Finance Ltd., vol. 22(1), pages 248-277, March.
    13. NAGHDI Yazdan & KAGHAZIAN Soheila, 2015. "The Effects Of Asymmetric Transmission Of Exchange Rate On Inflation In Iran:Application Of Threshold Models," Studies in Business and Economics, Lucian Blaga University of Sibiu, Faculty of Economic Sciences, vol. 10(2), pages 99-113, August.
    14. Augustine A. Boakye & Hassan Molana, 2007. "Fluctuation in the International Currency Reserves of Less Developed Countries: HIPC vs Non-HIPC," Dundee Discussion Papers in Economics 203, Economic Studies, University of Dundee.
    15. Rodriguez, Carlos Alfredo, 1989. "The external effects of public sector deficits," Policy Research Working Paper Series 299, The World Bank.
    16. Nergiz Dincer & Magda Kandil, 2011. "The effects of exchange rate fluctuations on exports: A sectoral analysis for Turkey," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 20(6), pages 809-837, June.
    17. Debabrata Datta & Susmita Chatterjee, 2013. "A Simple Model of Macroeconomic Instability in the Background of the Indian Economy," South Asian Journal of Macroeconomics and Public Finance, , vol. 2(1), pages 81-106, June.
    18. Donyina-Ameyaw, Samuel, 2004. "A Small Macroeconmetric Model Of Trade And Inflation In Ghana," The Warwick Economics Research Paper Series (TWERPS) 696, University of Warwick, Department of Economics.
    19. Hazari, Bharat R. & Sgro, Pasquale M., 2000. "Wage indexation, migration, and unemployment," International Review of Economics & Finance, Elsevier, vol. 9(3), pages 257-265, July.
    20. M Bahmani-Oskooee & I Miteza, 2006. "Stock Market Growth: An analysis of cointegration and causality," Economic Issues Journal Articles, Economic Issues, vol. 11(1), pages 37-64, March.
    21. Magda Kandil, 2006. "On the transmission of exchange rate fluctuations to the macroeconomy: Contrasting evidence for developing and developed countries," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 15(1), pages 101-127.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eej:eeconj:v:14:y:1988:i:2:p:181-187. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Victor Matheson, College of the Holy Cross (email available below). General contact details of provider: https://edirc.repec.org/data/eeaa1ea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.