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Real Effects of Exchange-Rate-Based Stabilization: An Analysis of Competing Theories

  • Rebelo, Sérgio

This paper uses a unified analytical framework to assess, both qualitatively and quantitatively, the relevance of the different hypotheses that have been proposed to explain the real effects of exchange-rate-based stabilizations. The four major hypotheses analysed are: (i) the supply-side effects associated with an inflation decline; (ii) the perception that the exchange rate peg is temporary; (iii) the fiscal adjustments that tend to accompany the peg; and (iv) the existence of nominal rigidities in wages or prices.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 1220.

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Date of creation: Aug 1995
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Handle: RePEc:cpr:ceprdp:1220
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