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

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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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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 5197.

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Date of creation: Jul 1995
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Publication status: published as Sergio Rebelo, Carlos A. Vegh. "Real Effects of Exchange-Rate-Based Stabilization: An Analysis of Competing Theories," in Ben S. Bernanke and Julio J. Rotemberg, eds., "NBER Macroeconomics Annual 1995, Volume 10" MIT Press (1995)
Handle: RePEc:nbr:nberwo:5197

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