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Exchange rate regimes and macroeconomic stabilization in a developing country

  • David H. Howard
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    Argentina's Austral Plan is used as a point of departure for the investigation of the role of exchange rate policy in a macroeconomic stabilization program for a developing country. A model of a country like Argentina is developed and the relationship between the exchange rate and macroeconomic policy is derived. The paper next explores the implementing of alternative macroeconomic policy strategies involving exchange rates. The framework provides a rough way of quantifying and making operational what is meant by "appropriate" fiscal and monetary policy in the context of a stabilization program. Finally, some practical aspects of implementing an exchange-rate-oriented macroeconomic stabilization program are discussed.

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    File URL: http://www.federalreserve.gov/pubs/ifdp/1987/314/default.htm
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    File URL: http://www.federalreserve.gov/pubs/ifdp/1987/314/ifdp314.pdf
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    Paper provided by Board of Governors of the Federal Reserve System (U.S.) in its series International Finance Discussion Papers with number 314.

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    Date of creation: 1987
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    Handle: RePEc:fip:fedgif:314
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    1. Persio Arida & André Lara Resende, 1985. "Inertial inflation and monetary reform in Brazil," Textos para discussão 85, Department of Economics PUC-Rio (Brazil).
    2. Robert J. Barro, 1983. "Inflationary Finance under Discretion and Rules," Canadian Journal of Economics, Canadian Economics Association, vol. 16(1), pages 1-16, February.
    3. Fernandez, Roque B., 1985. "The expectations management approach to stabilization in Argentina during 1976-1982," World Development, Elsevier, vol. 13(8), pages 871-892, August.
    4. Robert J. Barro & David B. Gordon, 1981. "A Positive Theory of Monetary Policy in a Natural-Rate Model," NBER Working Papers 0807, National Bureau of Economic Research, Inc.
    5. Eliana A. Cardoso & Rudiger Dornbusch, 1987. "Brazil's Tropical Plan," NBER Working Papers 2142, National Bureau of Economic Research, Inc.
    6. Fischer, Stanley, 1982. "Seigniorage and the Case for a National Money," Journal of Political Economy, University of Chicago Press, vol. 90(2), pages 295-313, April.
    7. Salant, Stephen W & Henderson, Dale W, 1978. "Market Anticipations of Government Policies and the Price of Gold," Journal of Political Economy, University of Chicago Press, vol. 86(4), pages 627-48, August.
    8. Paul R. Milgrom, 1978. "Rational Expectations," Discussion Papers 406, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
    9. Dale Henderson, 1984. "Exchange Market Intervention Operations: Their Role in Financial Policy and Their Effects," NBER Chapters, in: Exchange Rate Theory and Practice, pages 359-406 National Bureau of Economic Research, Inc.
    10. Jeffrey Sachs, 1986. "The Bolivian Hyperinflation and Stabilization," NBER Working Papers 2073, National Bureau of Economic Research, Inc.
    11. Barro, Robert J. & Gordon, David B., 1983. "Rules, discretion and reputation in a model of monetary policy," Journal of Monetary Economics, Elsevier, vol. 12(1), pages 101-121.
    12. Stephen W. Salant & Dale W. Henderson, 1976. "Market anticipations, government policy, and the price of gold," International Finance Discussion Papers 81, Board of Governors of the Federal Reserve System (U.S.).
    13. Bela Balassa, 1964. "The Purchasing-Power Parity Doctrine: A Reappraisal," Journal of Political Economy, University of Chicago Press, vol. 72, pages 584.
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