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A note on the credibility of Bank-Run-Preventing Devaluation policies

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  • Enrique Kawamura

    (Universidad de San Andres)

Abstract

In this note I provide a notion of a credible devaluation policy in the context of the Chang and Velasco (2000) model. I show that when the long term asset is illiquid enough a flexible exchange rate policy is credible. It is also shown that there exists a non-trivial range for the liquidation value of the long term investment technology for which the same policy is not credible. Finally I propose a different flexible exchange rate regime which is shown to be credible.

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File URL: http://www.depeco.econo.unlp.edu.ar/economica/ing/resumen-articulo.php?param=9¶m2=41
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Bibliographic Info

Article provided by Departamento de Economía, Facultad de Ciencias Económicas, Universidad Nacional de La Plata in its journal Económica.

Volume (Year): XLVIII (2002)
Issue (Month): 1-2 (January-December)
Pages: 51-67

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Handle: RePEc:lap:journl:527

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Cited by:
  1. Enrique L. Kawamura, 2000. "Banks with Peso-Dominated Deposits in Small Open Economies with Aggregate Liquidity Shocks," Working Papers 27, Universidad de San Andres, Departamento de Economia, revised Jun 2002.

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