Devaluation (levels versus rates) and balance of payments in a cash-in-advance economy
AbstractThis paper investigates the consequences of the currency devalution, both in levels and rates, on the balance of payments in a cash-in-advance economy with finite horizons, endogenous capital accumulation and international capital immobility. In this context, a once and for all currency devaluation induces a balance of payments surplus, whereas a sustained increase in the rate of devaluation produces, in principle, an ambiguous effect on the balance of payments. If however non-restrictive assumptions on some structural parameters are made, an increase in the devaluation rate leads to a balance of payments surplus, the exact opposite of Calvo's result (1981).
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Bibliographic InfoPaper provided by University of Molise, Dept. SEGeS in its series Economics & Statistics Discussion Papers with number esdp03001.
Length: 21 pages
Date of creation: 14 Apr 2003
Date of revision:
Devaluation; Balance of payments; Cash-in-advance constraint; Overlapping generations.;
Other versions of this item:
- Alberto Petrucci, 2003. "Devaluation (Levels versus Rates) and Balance of Payments in a Cash-in-Advance Economy," CEIS Research Paper 14, Tor Vergata University, CEIS.
- E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
- E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
This paper has been announced in the following NEP Reports:
- NEP-ALL-2003-06-04 (All new papers)
- NEP-CBA-2003-06-04 (Central Banking)
- NEP-IFN-2003-06-04 (International Finance)
- NEP-MON-2003-06-04 (Monetary Economics)
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