The Portuguese Disinflation Process: Analysis of Some Costs and Benefits
This study aims to analyse the Portuguese economic policy of disinflation through a nominal stabilization policy of the Portuguese escudo. We study the pegging of the Portuguese escudo (PTE) to the Deutsch mark (DM) knowing the reputation of the Bundesbank for its anti- inflationary record and the role played by the Deutsch mark in the stability processes of foreign exchange and European price levels. The study was based on the attainment of co-integrating relations using Johansen’s methodology, the construction of a Near-VAR model and the establishment of a simulation analysis. The acceptance of German monetary policy and the pegging of the escudo to the Deutsch mark allowed the Portuguese economy to achieve its primary goal of price stability. However, despite the credibility and stability gains obtained, the adoption of a disinflation policy led to a real appreciation of the escudo. This study tries to clarify the influence that an appreciation of the real exchange rate can have on GDP and price levels. It cannot be denied that Portugal has made great progress in its European integration, successfully integrating into the group of EMU member-states. However we can point to a decrease in Portuguese competitiveness as the price paid for the disinflation process. This reflects itself in lower wages, which in turn limit output growth. We find that it is of primary importance to realise both the benefits of disinflation, and the costs of the policies in terms of output.
(This abstract was borrowed from another version of this item.)
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): 16 (2009)
Issue (Month): 1 (May)
|Contact details of provider:|| Web page: http://www.springer.com|
|Order Information:||Web: http://www.springer.com/economics/european+integration/journal/11300|
References listed on IDEAS
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.:
- Guy Debelle, 1999. "Inflation Targeting and Output Stabilisation," RBA Research Discussion Papers rdp1999-08, Reserve Bank of Australia.
- Buiter, Willem H. & Grafe, Clemens, 2001. "No Pain, No Gain? The Simple Analytics of Efficient Disinflation in Open Economies," CEPR Discussion Papers 3038, C.E.P.R. Discussion Papers.
- Daniel L. Thornton, 1996. "The costs and benefits of price stability: an assessment of Howitt's rule," Review, Federal Reserve Bank of St. Louis, issue Mar, pages 23-38.
- Laurence Ball, 1994.
"What Determines the Sacrifice Ratio?,"
NBER Chapters,in: Monetary Policy, pages 155-193
National Bureau of Economic Research, Inc.
- Laurence Ball, 1993. "What determines the sacrifice ratio?," Working Papers 93-21, Federal Reserve Bank of Philadelphia.
- Laurence Ball, 1993. "What Determines the Sacrifice Ratio?," NBER Working Papers 4306, National Bureau of Economic Research, Inc.
- Vítor Gaspar & Ildeberta Abreu, 1999. "Price Stability and Intermediate Targets for Monetary Policy," Working Papers w199901, Banco de Portugal, Economics and Research Department.
- Ball, Laurence, 1991. "The Genesis of Inflation and the Costs of Disinflation," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 23(3), pages 439-452, August.
- Laurence Ball, 1991. "The genesis of inflation and the costs of disinflation," Proceedings, Federal Reserve Bank of Cleveland, pages 439-461.
- Laurence Ball, 1991. "The Genesis of Inflation and the Costs of Disinflation," NBER Working Papers 3621, National Bureau of Economic Research, Inc.
- Ball, Laurence, 1994. "Credible Disinflation with Staggered Price-Setting," American Economic Review, American Economic Association, vol. 84(1), pages 282-289, March.
- Laurence Ball, 1990. "Credible Disinflation with Staggered Price Setting," NBER Working Papers 3555, National Bureau of Economic Research, Inc.
- Christopher J. Neely & Christopher J. Waller, 1997. "A Benefit-Cost Analysis Of Disinflation," Contemporary Economic Policy, Western Economic Association International, vol. 15(1), pages 50-64, 01.
- Guillermo A. Calvo & Carlos A. Végh, 1994. "Inflation Stabilization And Nominal Anchors," Contemporary Economic Policy, Western Economic Association International, vol. 12(2), pages 35-45, 04.
- Johansen, Soren, 1995. "Likelihood-Based Inference in Cointegrated Vector Autoregressive Models," OUP Catalogue, Oxford University Press, number 9780198774501, April.
- Frederic S. Mishkin & Adam S. Posen, 1997. "Inflation targeting: lessons from four countries," Economic Policy Review, Federal Reserve Bank of New York, issue Aug, pages 9-110.
- Frederic S. Mishkin & Adam S. Posen, 1998. "Inflation Targeting: Lessons from Four Countries," NBER Working Papers 6126, National Bureau of Economic Research, Inc.
- Daniel Cohen & Jacques Mélitz & Gérard Oudiz, 1988. "Le système monétaire européen et l'asymétrie franc-mark," Revue Économique, Programme National Persée, vol. 39(3), pages 667-678.
- Karl-Heinz Todter & Gerhard Ziebarth, 1997. "Price Stability vs. Low Inflation in Germany: An Analysis of Costs and Benefits," NBER Working Papers 6170, National Bureau of Economic Research, Inc.
- David F. Hendry & Katarina Juselius, 2001. "Explaining Cointegration Analysis: Part II," The Energy Journal, International Association for Energy Economics, vol. 0(Number 1), pages 75-120.
- David F. Hendry & Katarina Juselius, 2000. "Explaining Cointegration Analysis: Part 1," The Energy Journal, International Association for Energy Economics, vol. 0(Number 1), pages 1-42.
- Katarina Juselius & David F. Hendry, 2000. "Explaining Cointegration Analysis: Part II," Discussion Papers 00-20, University of Copenhagen. Department of Economics.
- Tödter, Karl-Heinz & Ziebarth, Gerhard, 1997. "Price stability versus low inflation in Germany: An analysis of costs and benefits," Discussion Paper Series 1: Economic Studies 1997,03e, Deutsche Bundesbank, Research Centre.
- Sebastian Edwards, 1992. "Exchange Rates as Nominal Anchors," NBER Working Papers 4246, National Bureau of Economic Research, Inc.
- Laurence H. Meyer, 2001. "Inflation targets and inflation targeting," Review, Federal Reserve Bank of St. Louis, issue Nov., pages 1-14. Full references (including those not matched with items on IDEAS)