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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. 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.
  2. Klein, Michael W. & Marion, Nancy P., 1997. "Explaining the duration of exchange-rate pegs," Journal of Development Economics, Elsevier, vol. 54(2), pages 387-404, December.
  3. 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.
  4. Frankel, Jeffrey A & Rose, Andrew K, 1996. "Currency Crashes in Emerging Markets: Empirical Indicators," CEPR Discussion Papers 1349, C.E.P.R. Discussion Papers.
  5. John Williamson, 1994. "Estimating Equilibrium Exchange Rates," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 17.
  6. Dornbusch, Rudiger, 1974. "Tariffs and nontraded goods," Journal of International Economics, Elsevier, vol. 4(2), pages 177-185, May.
  7. 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.
  8. Rudiger Dornbusch, 1985. "Purchasing Power Parity," NBER Working Papers 1591, National Bureau of Economic Research, Inc.
  9. Froot, Kenneth A. & Rogoff, Kenneth, 1995. "Perspectives on PPP and long-run real exchange rates," Handbook of International Economics, in: G. M. Grossman & K. Rogoff (ed.), Handbook of International Economics, edition 1, volume 3, chapter 32, pages 1647-1688 Elsevier.
  10. Jeffrey A. Frankel & Andrew K. Rose, 1995. "A Panel Project on Purchasing Power Parity: Mean Reversion Within and Between Countries," NBER Working Papers 5006, National Bureau of Economic Research, Inc.
  11. 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.
  12. 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.
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