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Real Effects of Exchange-Rate-Based Stabilization: An Analysis of Competing Theories

In: NBER Macroeconomics Annual 1995, Volume 10

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  • Sergio Rebelo
  • Carlos A. Vegh

Abstract

This paper uses a unified analytical framework to assess, both qualitatively and quantitatively, the relevance of the different hypotheses that have been proposed to explain the real effects of exchange rate-based stabilizations. The four major hypotheses analyzed are: (i) the supply-side effects associated with an inflation decline; (ii) the perception that the exchange rate peg is temporary; (iii) the fiscal adjustments that tend to accompany the peg; and (iv) the existence of nominal rigidities in wages or prices.

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This chapter was published in:

  • Ben S. Bernanke & Julio J. Rotemberg, 1996. "NBER Macroeconomics Annual 1995, Volume 10," NBER Books, National Bureau of Economic Research, Inc, number bern95-1, October.
    This item is provided by National Bureau of Economic Research, Inc in its series NBER Chapters with number 11018.

    Handle: RePEc:nbr:nberch:11018

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