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Large Devaluations and the Real Exchange Rate

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Author Info

  • Ariel Burstein

    (University of California at Los Angeles)

  • Martin Eichenbaum

    (Northwestern University, NBER, and Federal Reserve of Chicago.)

  • Sergio Rebelo

    (Northwestern University, NBER, and CEPR.)

Abstract

In this paper we argue that the primary force behind the large drop in real exchange rates that occurs after large devaluations is the slow adjustment in the price of nontradable goods and services. Our empirical analysis uses data from five large devaluation episodes: Argentina (2001), Brazil (1999), Korea (1997), Mexico (1994), and Thailand (1997). We conduct a detailed analysis of the Argentina case using disaggregated CPI data, data from our own survey of prices in Buenos Aires, and scanner data from supermarkets. We assess the robustness of our findings by studying large real-exchange-rate appreciations, medium devaluations, and small exchange-rate movements.

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File URL: http://rcer.econ.rochester.edu/RCERPAPERS/rcer_513.pdf
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Bibliographic Info

Paper provided by University of Rochester - Center for Economic Research (RCER) in its series RCER Working Papers with number 513.

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Length: 28 pages
Date of creation: Nov 2004
Date of revision:
Handle: RePEc:roc:rocher:513

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Postal: University of Rochester, Center for Economic Research, Department of Economics, Harkness 231 Rochester, New York 14627 U.S.A.

Related research

Keywords: Claims problems; Replication; Random arrival rule; Proportional rule; Minimal overlap rule; Constrained equal losses rule.;

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References

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  1. Un débat et un dialogue
    by Alberto Bagnai in Goofynomics on 2014-03-04 21:11:00
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