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Convergence, Competitiveness and the Exchange Rate


  • Boltho, Andrea


Standard theory predicts that exchange rate changes have merely temporary real effects. Yet, if the higher profits that a devaluation ensures are used to improve non-price competitiveness, longer-run effects are possible. The paper looks at the experience of Germany, Spain, France and Italy which, in the 1950s and 1960s, either benefited from low parities or devalued their currencies. Favourable exchange rates probably contributed to these countries' rapid growth, but so did trade liberalization. In today's Europe the scope for further trade liberalization is limited while the uncertainties introduced by floating exchange rates make successful devaluations less likely.

Suggested Citation

  • Boltho, Andrea, 1994. "Convergence, Competitiveness and the Exchange Rate," CEPR Discussion Papers 970, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:970

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    References listed on IDEAS

    1. Eichengreen, Barry & Uzan, Marc, 1992. "The Marshall Plan: Economic Effects and Implications for Eastern Europe and the Former USSR," CEPR Discussion Papers 638, C.E.P.R. Discussion Papers.
    2. Fernandez, Raquel & Glazer, Jacob, 1991. "Striking for a Bargain between Two Completely Informed Agents," American Economic Review, American Economic Association, vol. 81(1), pages 240-252, March.
    3. Anat R. Admati & Motty Perry, 1987. "Strategic Delay in Bargaining," Review of Economic Studies, Oxford University Press, vol. 54(3), pages 345-364.
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    More about this item


    Bretton Woods; Competitiveness; Exchange Rates; Trade Liberalization;

    JEL classification:

    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • N14 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - Europe: 1913-


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