Temporary stabilization: a Fréchet-Weibullextreme value distribution approach
This paper develops, in a small open economy of pure exchange framework, a stochastic model of exchange-rate-based inflation stabilization plan that is expected to be temporary. Agents have expectations of devaluation driven by a mixed diffusionjump process where the expected size of a possible devaluation is supposed to have an extreme value distribution of the Fréchet-Weibull type. Consumption and wealth equilibrium dynamics are examined when such a stabilization plan is implemented. It is assumed that financial markets are incomplete, that is, there are more risk factors than risky assets. Finally, the effects of exogenous shocks on economic welfare are assessed.
Volume (Year): 9 (2012)
Issue (Month): 1 (Enero-Junio)
|Contact details of provider:|| Postal: |
Phone: 636 6270
Fax: 633 6975
Web page: http://econoquantum.cucea.udg.mx
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Stanley Fischer, 2001. "Exchange Rate Regimes: Is the Bipolar View Correct?," Journal of Economic Perspectives, American Economic Association, vol. 15(2), pages 3-24, Spring.
- Helpman, Elhanan & Razin, Assaf, 1987.
"Exchange Rate Management: Intertemporal Tradeoffs,"
American Economic Review,
American Economic Association, vol. 77(1), pages 107-23, March.
- Uribe, Martin, 2002. "The price-consumption puzzle of currency pegs," Journal of Monetary Economics, Elsevier, vol. 49(3), pages 533-569, April.
- 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.
- Sergio Rebelo & Carlos A. Vegh, 1995. "Real Effects of Exchange-Rate-Based Stabilization: An Analysis of Competing Theories," NBER Chapters, in: NBER Macroeconomics Annual 1995, Volume 10, pages 125-188 National Bureau of Economic Research, Inc.
- Rebelo, S. & Vegh, C.A., 1995. "Real Effects of Exchange-Rate-Based Stabilization: An Analysis of Competing Theories," RCER Working Papers 405, University of Rochester - Center for Economic Research (RCER).
- Sergio Rebelo & Carlos A. Vegh, 1995. "Real Effects of Exchange Rate-Based Stabilization: An Analysis of Competing Theories," NBER Working Papers 5197, National Bureau of Economic Research, Inc.
- Akgiray, Vedat & Booth, G Geoffrey, 1988. "Mixed Diffusion-Jump Process Modeling of Exchange Rate Movements," The Review of Economics and Statistics, MIT Press, vol. 70(4), pages 631-37, November.
- Carlos A. VÃ©gh, 1992. "Stopping High Inflation: An Analytical Overview," IMF Staff Papers, Palgrave Macmillan, vol. 39(3), pages 626-695, September.
- Enrique G. Mendoza & Martin Uribe, 1997.
"The syndrome of exchange-rate-based stabilizations and the uncertain duration of currency pegs,"
Discussion Paper / Institute for Empirical Macroeconomics
121, Federal Reserve Bank of Minneapolis.
- Enrique G. Mendoza & Martin Uribe, 1996. "The syndrome of exchange-rate-based stabilizations and the uncertain duration of currency pegs," International Finance Discussion Papers 548, Board of Governors of the Federal Reserve System (U.S.).
- Mendoza, Enrique & Uribe, Martin, 1997. "The Syndrome of Exchange-Rate-Based Stabilizations and the Uncertain Duration of Currency Pegs," Working Papers 97-30, Duke University, Department of Economics.
- Venegas-Martínez, Francisco, 2010. "Planes no creíbles de estabilización de precios, riesgo cambiario y opciones reales para posponer consumo. Un análisis con volatilidad estocástica," El Trimestre Económico, Fondo de Cultura Económica, vol. 0(308), pages 899-936, octubre-d.
- Venegas-Martinez, Francisco, 2001. "Temporary stabilization: A stochastic analysis," Journal of Economic Dynamics and Control, Elsevier, vol. 25(9), pages 1429-1449, September.
- Venegas-Martinez, Francisco, 2006. "Stochastic temporary stabilization: Undiversifiable devaluation and income risks," Economic Modelling, Elsevier, vol. 23(1), pages 157-173, January.
- Calvo, Guillermo A, 1986. "Temporary Stabilization: Predetermined Exchange Rates," Journal of Political Economy, University of Chicago Press, vol. 94(6), pages 1319-29, December.
- Mendoza, Enrique G, 2001.
"The Benefits of Dollarization When Stabilization Policy Lacks Credibility and Financial Markets Are Imperfect,"
Journal of Money, Credit and Banking,
Blackwell Publishing, vol. 33(2), pages 440-74, May.
- Enrique G. Mendoza, 2001. "The benefits of dollarization when stabilization policy lacks credibility and financial markets are imperfect," Proceedings, Federal Reserve Bank of Cleveland, pages 440-481.
- Guillermo A. Calvo & Carmen M. Reinhart, 2000.
"Fear of Floating,"
NBER Working Papers
7993, National Bureau of Economic Research, Inc.
- Mendoza, Enrique G. & Uribe, Martin, 2000. "Devaluation risk and the business-cycle implications of exchange-rate management," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 53(1), pages 239-296, December.
When requesting a correction, please mention this item's handle: RePEc:qua:journl:v:9:y:2012:i:1:p:35-55. 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: (Sandra Ivett Portugal Padilla)
If references are entirely missing, you can add them using this form.