Devaluation and Monetary Policy in Developing Countries: A General Equilibrium Model for Economies Facing Financial Constraints
The short-run response of output to devaluation and monetary policies is investigated for economies where firms are constrained to finance in advance their working capital by borrowing solely from domestic banks. It is shown that in contrast with traditional theories, but in accordance with recent theoretical and empirical analyses for developing countries, an anticipated devaluation or an anticipated decrease in the level of the exogenous component of money might result in a short-run output contraction even if prices fully adjust to clear markets. In addition, the paper analyses how output responds when a devaluation is unanticipated or when agents cannot distinguish between temporary and permanent monetary shocks.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Volume (Year): 34 (1987)
Issue (Month): 3 (September)
|Contact details of provider:|| Web page: http://www.palgrave-journals.com/|
|Order Information:|| Postal: Palgrave Macmillan Journals, Subscription Department, Houndmills, Basingstoke, Hampshire RG21 6XS, UK|
Web: http://www.palgrave-journals.com/pal/subscribe/index.html Email:
When requesting a correction, please mention this item's handle: RePEc:pal:imfstp:v:34:y:1987:i:3:p:439-470. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Iulia Badea)
If references are entirely missing, you can add them using this form.