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Alternative Strategies for Real Devaluation and the Sequencing of Economic Reforms in Developing Countries

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  • Schweickert, Rainer

Abstract

The two basic strategies for real exchange devaluation--monetary contraction and nominal devaluation--are compared with respect to their efficiency. Monetary contraction has important merits but may suffer more from internal and external financial constraints. The efficiency of real devaluation is diminished by an immediate relaxation of exchange controls but improved by trade and domestic capital market liberalization. For financially repressed economies, monetary contraction is superior because it provides the conditions for both a successful real devaluation and a first step towards capital market liberalization, namely a reduction in inflation rates. Copyright 1993 by WWZ and Helbing & Lichtenhahn Verlag AG

Suggested Citation

  • Schweickert, Rainer, 1993. "Alternative Strategies for Real Devaluation and the Sequencing of Economic Reforms in Developing Countries," Kyklos, Wiley Blackwell, vol. 46(1), pages 65-85.
  • Handle: RePEc:bla:kyklos:v:46:y:1993:i:1:p:65-85
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    Cited by:

    1. Schweickert, Rainer, 2003. "Vom Washington-Konsens zum Post-Washington-Dissens? Glaubwürdigkeit, Timing und Sequencing wirtschaftlicher Reformen," Open Access Publications from Kiel Institute for the World Economy 3082, Kiel Institute for the World Economy (IfW).
    2. Schweickert, Rainer, 1993. "Lessons from exchange rate based stabilization in Argentina," Kiel Working Papers 567, Kiel Institute for the World Economy (IfW).
    3. Rainer Schweickert, 2002. "The integration of accession countries into EMU—Concerns about convergence," Intereconomics: Review of European Economic Policy, Springer;German National Library of Economics;Centre for European Policy Studies (CEPS), vol. 37(2), pages 85-90, March.
    4. Schweickert, Rainer, 2001. "Assessing the advantages of EMU-enlargement for the EU and the accession countries: a comparative indicator approach," Kiel Working Papers 1080, Kiel Institute for the World Economy (IfW).
    5. Schweickert, Rainer, 1994. "Regional integration: A worthwhile strategy for catching up?," Kiel Working Papers 623, Kiel Institute for the World Economy (IfW).
    6. Rainer Schweickert, 1994. "Stabilization and real adjustment in emerging market economies," Intereconomics: Review of European Economic Policy, Springer;German National Library of Economics;Centre for European Policy Studies (CEPS), vol. 29(5), pages 244-252, September.
    7. Schweickert, Rainer, 1994. "Macroeconomic reforms in the Southern cone: lessons for developing and newly emerging market economies," Kiel Working Papers 614, Kiel Institute for the World Economy (IfW).
    8. Funke, Norbert, 1993. "Timing and sequencing of reforms: Competing views," Kiel Working Papers 552, Kiel Institute for the World Economy (IfW).
    9. Hiemenz, Ulrich & Funke, Norbert, 1993. "The experience of developing countries with macroeconomic stabilisation and structural adjustment," Kiel Working Papers 606, Kiel Institute for the World Economy (IfW).

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