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The Aftermath of Appreciations

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  • Ilan Goldfajn
  • Rodrigo O. Valdés

Abstract

This paper empirically analyzes a broad range of real exchange rate appreciation episodes. The objective is twofold. First, the paper studies the dynamics of appreciations, using a sample that is not limited to cases that end in crisis (or devaluation). Second, the paper analyzes the mechanism by which overvaluations are corrected. In particular, for various degrees of misalignment we calculate the proportion of the reversions that occur through nominal devaluations rather than through cumulative inflation differentials. The overall conclusion is that in most cases large and medium appreciations are reversed with nominal devaluations.

Suggested Citation

  • Ilan Goldfajn & Rodrigo O. Valdés, 1999. "The Aftermath of Appreciations," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 114(1), pages 229-262.
    • Handle: RePEc:oup:qjecon:v:114:y:1999:i:1:p:229-262.
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    File URL: http://hdl.handle.net/10.1162/003355399555990
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    References listed on IDEAS

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    More about this item

    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions

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