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Why is Inflation so Low after Large Devaluations?

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Author Info
Ariel Burstein () (University of Michigan)
Martin Eichenbaum () (Northwestern University)
Sergio Rebelo () (Northwestern University)

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Abstract

This paper studies the behavior of inflationnafter nine large post-1990 contractionary devaluations. A salient feature of the data is that inflation is low relative to the rate of devaluation. We argue that distribution costs and substitution away from imports to lower quality local goods can account quantitatively for the post-devaluation behavior of prices.

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File URL: http://econ.core.hu/doc/dp/dp/mtdp0308.pdf
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Publisher Info
Paper provided by Institute of Economics, Hungarian Academy of Sciences in its series IEHAS Discussion Papers with number 0308.

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Length: 56 pages
Date of creation: Jun 2003
Date of revision:
Handle: RePEc:has:discpr:0308

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Related research
Keywords: inflation; devaluation; exchange rates;

Find related papers by JEL classification:
F31 - International Economics - - International Finance - - - Foreign Exchange

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

  1. Aghion, Philippe & Bacchetta, Philippe & Banerjee, Abhijit, 2001. "Currency crises and monetary policy in an economy with credit constraints," European Economic Review, Elsevier, vol. 45(7), pages 1121-1150. [Downloadable!] (restricted)
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  2. Martin Neil Baily & Robert M. Solow, 2001. "International Productivity Comparisons Built from the Firm Level," Journal of Economic Perspectives, American Economic Association, vol. 15(3), pages 151-172, Summer. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Charles Engel, 2004. "On the Relationship between Pass-Through and Sticky Nominal Prices," Working Papers 112004, Hong Kong Institute for Monetary Research. [Downloadable!]
  2. Burstein, Ariel Tomas & Neves, Joao C & Rebelo, Sérgio, 2004. "Investment Prices and Exchange Rates: Some Basic Facts," CEPR Discussion Papers 4290, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  3. de Blas, Beatriz, 2008. "International Transmission of Shocks under Financial Frictions: Some Implications for International Business Cycle Comovement," Working Papers in Economic Theory 2008/01, Universidad Autónoma de Madrid (Spain), Department of Economic Analysis (Economic Theory and Economic History). [Downloadable!]
  4. Miguel Fuentes, 2007. "Pass-Through to Import Prices: Evidence from Developing Countries," Documentos de Trabajo 320, Instituto de Economía. Pontificia Universidad Católica de Chile.. [Downloadable!]
  5. Michael B. Devereux & Charles Engel, 2005. "Expenditure Switching vs. Real Exchange Rate Stabilization: Competing Objectives for Exchange Rate Policy," Working Papers 082005, Hong Kong Institute for Monetary Research. [Downloadable!]
    Other versions:
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This page was last updated on 2009-11-25.

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