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Are Stabilization Programs Expansionary?

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  • Federico Echenique
  • Alvaro Forteza

    (Departamento de Economía, Facultad de Ciencias Sociales, Universidad de la República)

Abstract

The empirical evidence presented in this paper casts doubts on the by now widely accepted "fact"that the exchange rate based stabilization programs are expansionary. Even though these programs were associated with output booms, no evidence of booms caused both by the stabilization programs is found. rather, positive external shocks seem to have caused both the output booms and the stabilization programs.

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File URL: http://decon.edu.uy/publica/1997/Doc0497.pdf
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Bibliographic Info

Paper provided by Department of Economics - dECON in its series Documentos de Trabajo (working papers) with number 0497.

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Length: 19 pages
Date of creation: Sep 1997
Date of revision:
Handle: RePEc:ude:wpaper:0497

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Keywords: Price stabilization; Inflation.;

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References

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  1. Reinhart, Carmen & Calvo, Guillermo & Leiderman, Leonardo, 1994. "The capital inflows problem: Concepts and issues," MPRA Paper 13902, University Library of Munich, Germany.
  2. Federico Echenique & Alvaro Forteza, 1997. "Are Stabilization Programs Expansionary?," Documentos de Trabajo (working papers) 0497, Department of Economics - dECON.
  3. Levine, Ross & Renelt, David, 1991. "A sensitivity analysis of cross-country growth regressions," Policy Research Working Paper Series 609, The World Bank.
  4. Jorge E. Roldós, 1995. "Supply-Side Effects of Disinflation Programs," IMF Staff Papers, Palgrave Macmillan, vol. 42(1), pages 158-183, March.
  5. Calvo, Guillermo A, 1986. "Temporary Stabilization: Predetermined Exchange Rates," Journal of Political Economy, University of Chicago Press, vol. 94(6), pages 1319-29, December.
  6. Rebelo, Sérgio, 1995. "Real Effects of Exchange-Rate-Based Stabilization: An Analysis of Competing Theories," CEPR Discussion Papers 1220, C.E.P.R. Discussion Papers.
  7. Carmen Reinhart & Guillermo Calvo & Leonardo Leiderman, 1992. "Capital Inflows to Latin America," IMF Working Papers 92/85, International Monetary Fund.
  8. Alessandra Casella & Barry Eichengreen, 1994. "Can Foreign Aid Accelerate Stabilization?," NBER Working Papers 4694, National Bureau of Economic Research, Inc.
  9. Reinhart, Carmen M. & Vegh, Carlos A., 1995. "Nominal interest rates, consumption booms, and lack of credibility: A quantitative examination," Journal of Development Economics, Elsevier, vol. 46(2), pages 357-378, April.
  10. Stanley Fischer, 1984. "Real Balances, the Exchange Rate and Indexation: Real Variables in Disinflation," NBER Working Papers 1497, National Bureau of Economic Research, Inc.
  11. Fischer, Stanley, 1988. "Real Balances, the Exchange Rate, and Indexation: Real Variables in Disinflation," The Quarterly Journal of Economics, MIT Press, vol. 103(1), pages 27-49, February.
  12. Helpman, Elhanan & Razin, Assaf, 1987. "Exchange Rate Management: Intertemporal Tradeoffs," American Economic Review, American Economic Association, vol. 77(1), pages 107-23, March.
  13. Alesina, Alberto & Drazen, Allan, 1991. "Why Are Stabilizations Delayed?," American Economic Review, American Economic Association, vol. 81(5), pages 1170-88, December.
  14. repec:nbr:nberre:0126 is not listed on IDEAS
  15. Adriana Cassoni, 1996. "A bargaining model with uncertainty and varying outside opportunities," Documentos de Trabajo (working papers) 1096, Department of Economics - dECON.
  16. Robert J. Gordon, 1982. "Why Stopping Inflation May Be Costly: Evidence from Fourteen Historical Episodes," NBER Chapters, in: Inflation: Causes and Effects, pages 11-40 National Bureau of Economic Research, Inc.
  17. Leamer, Edward E, 1985. "Sensitivity Analyses Would Help," American Economic Review, American Economic Association, vol. 75(3), pages 308-13, June.
  18. Taylor, John B, 1980. "Aggregate Dynamics and Staggered Contracts," Journal of Political Economy, University of Chicago Press, vol. 88(1), pages 1-23, February.
  19. Michael Bruno & Guido Di Tella & Rudiger Dornbusch & Stanley Fischer, 1988. "Inflation Stabilization: The Experience of Israel, Argentina, Brazil, Bolivia, and Mexico," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262022796, December.
  20. Laurence Ball, 1994. "What Determines the Sacrifice Ratio?," NBER Chapters, in: Monetary Policy, pages 155-193 National Bureau of Economic Research, Inc.
  21. Uribe, Martin, 1997. "Exchange-rate-based inflation stabilization: The initial real effects of credible plans," Journal of Monetary Economics, Elsevier, vol. 39(2), pages 197-221, July.
  22. Athanasios Orphanides, 1992. "The timing of stabilizations," Finance and Economics Discussion Series 194, Board of Governors of the Federal Reserve System (U.S.).
  23. Alejandro Nin & María Inés Terra, 1996. "Mercosur: un camino a la apertura o la consolidación de un bloque cerrado?," Documentos de Trabajo (working papers) 0996, Department of Economics - dECON.
  24. Marcel Vaillant, 1996. "El GATT 94 y la Organización Mundial del Comercio. Una nueva agenda para Uruguay," Documentos de Trabajo (working papers) 0496, Department of Economics - dECON.
  25. Gustavo Bittencourt & Rosario Domingo, 1996. "Inversión Extranjera Directa en Uruguay: tendencias y determinantes," Documentos de Trabajo (working papers) 0696, Department of Economics - dECON.
  26. repec:imf:imfpdp:9310 is not listed on IDEAS
  27. Elvio Accinelli & Martín Puchet, 1996. "An application of the catastrophe theory in general equilibrium theory," Documentos de Trabajo (working papers) 0296, Department of Economics - dECON.
  28. Reinhart, Carmen & Vegh, Carlos, 1994. "Inflation stabilization in chronic inflation countries: The empirical evidence," MPRA Paper 13689, University Library of Munich, Germany.
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Citations

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Cited by:
  1. Alvaro Forteza & Martín Rama, 2000. "Labor Market "Rigidity" and the Success of Economic Reforms Across more than One Hundred Countries," Documentos de Trabajo (working papers) 0600, Department of Economics - dECON.
  2. Traversa, Federico, 2004. "Estabilización con ancla cambiaria y apertura externa en el Uruguay de la década de 1990: una combinación difícil
    [Exchange rate based stabilization and trade liberalization in Uruguay during t
    ," MPRA Paper 53263, University Library of Munich, Germany.
  3. Federico Echenique & Alvaro Forteza, 1996. "Are stabilization programs expansionary?," Documentos de Trabajo (working papers) 0196, Department of Economics - dECON.
  4. Alvaro Forteza & Martin Rama, 2006. "Labor Market 'Rigidity' and the Success of Economic Reforms Across More Than 100 Countries," Journal of Economic Policy Reform, Taylor & Francis Journals, vol. 9(1), pages 75-105.
  5. Stanley Fischer & Ratna Sahay & Carlos A. V�gh, 2002. "Modern Hyper- and High Inflations," Journal of Economic Literature, American Economic Association, vol. 40(3), pages 837-880, September.
  6. Alvaro Forteza, 1998. "Un modelo de simulación de la Reforma de la Seguridad Social en Uruguay," Documentos de Trabajo (working papers) 0598, Department of Economics - dECON.
  7. Ari Aisen, 2004. "Money-Based Versus Exchange-Rate-Based Stabilization," IMF Working Papers 04/94, International Monetary Fund.
  8. Alvaro Forteza, 1995. "Welfare state dynamics," Documentos de Trabajo (working papers) 0896, Department of Economics - dECON.
  9. Walter García Fontes & Ruben Tansini, 1996. "The effects of trade liberalization on R&D investments: the case of the Uruguayan manufacturing industry," Documentos de Trabajo (working papers) 0396, Department of Economics - dECON.

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