IDEAS home Printed from https://ideas.repec.org/h/elg/eechap/20918_8.html

When are devaluations more contractionary? A quantile VAR estimation for Argentina

In: Monetary Policy Challenges in Latin America

Author

Listed:
  • Gabriel Montes-Rojas
  • Nicolás Bertholet

Abstract

This chapter presents empirical evidence on the short- and medium-run contractionary effects of exchange rate shocks and currency devaluations for bimonetary (i.e., highly dollarized) countries, in particular, for Argentina for the period January 2004-December 2018. Using a vector autoregressive representation with quantile heterogeneity, it implements a multivariate model with four macroeconomic variables: exchange rate variations, inflation, economic activity, and nominal wage growth. The empirical results show a 30 percent price pass-through effect and a bimodal effect on output, with both positive and negative effects. Wages adjust less than prices with the consequent effect that real wages have a negative elasticity of 0.23 with respect to exchange rate shocks. Further analysis of the multivariate responses shows that the negative effect on output is associated with a decline in real wages: a 1 percent fall in real wages after a currency devaluation produces a 2.3 percent decline in output.

Suggested Citation

  • Gabriel Montes-Rojas & Nicolás Bertholet, 2023. "When are devaluations more contractionary? A quantile VAR estimation for Argentina," Chapters, in: Fernando Toledo & Louis-Philippe Rochon (ed.), Monetary Policy Challenges in Latin America, chapter 8, pages 132-149, Edward Elgar Publishing.
    • Handle: RePEc:elg:eechap:20918_8
    as

    Download full text from publisher

    File URL: https://www.elgaronline.com/doi/10.4337/9781802200706.00020
    Download Restriction: no
    ---><---

    Other versions of this item:

    More about this item

    Keywords

    ;
    ;
    ;

    JEL classification:

    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:elg:eechap:20918_8. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Darrel McCalla (email available below). General contact details of provider: http://www.e-elgar.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.