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The Aftermath Of Appreciations

  • Ilan Goldfajn
  • Rodrigo O. ValdŽs

This paper empirically analyzes a broad range of real exchange rate appreciation episodes. The objective is twofold. First, the paper studies the dynamics of appreciations, using a sample that is not limited to cases that end in crisis (or devaluation). Second, the paper analyzes the mechanism by which overvaluations are corrected. In particular, for various degrees of misalignment we calculate the proportion of the reversions that occur through nominal devaluations rather than through cumulative inflation differentials. The overall conclusion is that in most cases large and medium appreciations are reversed with nominal devaluations. © 2000 the President and Fellows of Harvard College and the Massachusetts Institute of Technology

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Article provided by MIT Press in its journal The Quarterly Journal of Economics.

Volume (Year): 114 (1999)
Issue (Month): 1 (February)
Pages: 229-262

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Handle: RePEc:tpr:qjecon:v:114:y:1999:i:1:p:229-262
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  1. Atish R. Ghosh & Anne-Marie Gulde & Jonathan D. Ostry & Holger C. Wolf, 1997. "Does The Nominal Exchange Rate Regime Matter?," Working Papers 97-09, New York University, Leonard N. Stern School of Business, Department of Economics.
  2. Jeffrey A. Frankel and Andrew K. Rose., 1995. "A Panel Project on Purchasing Power Parity: Mean Reversion Within and Between Countries," Center for International and Development Economics Research (CIDER) Working Papers C95-052, University of California at Berkeley.
  3. 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.
  4. Kenneth A. Froot & Kenneth Rogoff, 1994. "Perspectives on PPP and Long-Run Real Exchange Rates," NBER Working Papers 4952, National Bureau of Economic Research, Inc.
  5. Barry Eichengreen & Andrew K. Rose & Charles Wyplosz, 1994. "Speculative Attacks on Pegged Exchange Rates: An Empirical Exploration with Special Reference to the European Monetary System," NBER Working Papers 4898, National Bureau of Economic Research, Inc.
  6. Michael W. Klein & Nancy P. Marion, 1994. "Explaining the Duration of Exchange-Rate Pegs," NBER Working Papers 4651, National Bureau of Economic Research, Inc.
  7. Dornbusch, Rudiger, 1974. "Tariffs and nontraded goods," Journal of International Economics, Elsevier, vol. 4(2), pages 177-185, May.
  8. Paul Krugman, 1996. "Are Currency Crises Self-Fulfilling?," NBER Chapters, in: NBER Macroeconomics Annual 1996, Volume 11, pages 345-407 National Bureau of Economic Research, Inc.
  9. Rudger Dornbusch & Ilan Goldfajn & Rodrigo O. Valdés, 1995. "Currency Crises and Collapses," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 26(2), pages 219-294.
  10. Jeffrey A. Frankel & Andrew K. Rose, 1996. "Currency Crashes in Emerging Markets: Empirical Indicators," NBER Working Papers 5437, National Bureau of Economic Research, Inc.
  11. Rudiger Dornbusch, 1985. "Purchasing Power Parity," NBER Working Papers 1591, National Bureau of Economic Research, Inc.
  12. Jonathan David Ostry & Anne Marie Gulde & Atish R. Ghosh & Holger C. Wolf, 1995. "Does the Nominal Exchange Rate Regime Matter?," IMF Working Papers 95/121, International Monetary Fund.
  13. John Williamson, 1994. "Estimating Equilibrium Exchange Rates," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 17, May.
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