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Why Are Rates of Inflation So Low After large Devaluations

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  • Burstein, Ariel Tomas
  • Eichenbaum, Martin
  • Rebelo, Sérgio

Abstract

This Paper studies the behaviour of inflation after nine large post-1990 contractionary devaluations. A salient feature of the data is that inflation is low relative to the rate of devaluation. We argue that distribution costs and substitution away from imports to lower quality local goods can account quantitatively for the post-devaluation behaviour of prices.

Suggested Citation

  • Burstein, Ariel Tomas & Eichenbaum, Martin & Rebelo, Sérgio, 2002. "Why Are Rates of Inflation So Low After large Devaluations," CEPR Discussion Papers 3178, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:3178
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    More about this item

    Keywords

    devaluation; exchange rates; inflation;
    All these keywords.

    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange

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