Credit and Exchange Rate-Based Stabilization
This paper examines the behavior of private sector credit in chronic inflation countries that undergo exchange rate-based inflation stabilizations. It concludes that these programs are characterized by a strong increase in private sector credit, both in absolute terms and as a fraction of real economic activity. Empirical results using data for Mexico, Chile, Argentina, and Israel support a negative statistically significant relationship between credit and inflation for Mexico, Argentina, and Chile, but not for Israel. In addition, for both Chile and Mexico, dummy variables representing periods of inflation stabilization are positive and statistically different from zero indicating a stronger expansion in private sector credit during stabilization. These results could potentially explain the consumption boom that is usually present in the early stages of these programs.
|Date of creation:||01 May 1996|
|Date of revision:|
|Contact details of provider:|| Postal: International Monetary Fund, Washington, DC USA|
Phone: (202) 623-7000
Fax: (202) 623-4661
Web page: http://www.imf.org/external/pubind.htm
More information through EDIRC
|Order Information:||Web: http://www.imf.org/external/pubs/pubs/ord_info.htm|
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Elhanan Helpman & Assaf Razin, 1985.
"Exchange Rate Management: Intertemporal Tradoffs,"
NBER Working Papers
1590, National Bureau of Economic Research, Inc.
- Allan Drazen & Elhanan Helpman, 1987. "Stabilization with Exchange Rate Management under Uncertainty," NBER Working Papers 2268, National Bureau of Economic Research, Inc.
- N. Gregory Mankiw, 1983.
"Consumer Durables and the Real Interest Rate,"
NBER Working Papers
1148, National Bureau of Economic Research, Inc.
- Olivier J. Blanchard, 1984.
"Debt, Deficits and Finite Horizons,"
NBER Working Papers
1389, National Bureau of Economic Research, Inc.
- Reinhart, Carmen M. & Vegh, Carlos A., 1995.
"Nominal interest rates, consumption booms, and lack of credibility: A quantitative examination,"
Journal of Development Economics,
Elsevier, vol. 46(2), pages 357-378, April.
- Reinhart, Carmen & Vegh, Carlos, 1995. "Nominal interest rates, consumption booms, and lack of credibility: A quantitative examination," MPRA Paper 13898, University Library of Munich, Germany.
- Brunner, Karl & Meltzer, Allan H, 1988. "Money and Credit in the Monetary Transmission Process," American Economic Review, American Economic Association, vol. 78(2), pages 446-51, May.
- Guillermo A. Calvo & Fabrizio Coricelli, 1993.
"Output Collapse in Eastern Europe: The Role of Credit,"
IMF Staff Papers,
Palgrave Macmillan, vol. 40(1), pages 32-52, March.
- Guillermo Calvo & Fabrizio Coricelli, 1992. "Output Collapse in Eastern Europe; The Role of Credit," IMF Working Papers 92/64, International Monetary Fund.
- Rodriguez, Carlos Alfredo, 1982. "The Argentine stabilization plan of December 20th," World Development, Elsevier, vol. 10(9), pages 801-811, September.
- Marilyn E. Skiles, 1991. "Stabilization and financial sector reform in Mexico," Research Paper 9125, Federal Reserve Bank of New York.
- Cochrane, John H, 1988. "How Big Is the Random Walk in GNP?," Journal of Political Economy, University of Chicago Press, vol. 96(5), pages 893-920, October.
- Mathieson, Donald J., 1982. "Inflation, interest rates, and the balance of payments during a financial reform: The case of Argentina," World Development, Elsevier, vol. 10(9), pages 813-827, September.
- Allan Drazen & Elhanan Helpman, 1987. "Stabilization with Exchange Rate Management," The Quarterly Journal of Economics, Oxford University Press, vol. 102(4), pages 835-855.
- Friedman, Benjamin M, 1988. "Monetary Policy without Quantity Variables," American Economic Review, American Economic Association, vol. 78(2), pages 440-45, May.
- Benjamin M. Friedman, 1988. "Monetary Policy Without Quantity Variables," NBER Working Papers 2552, National Bureau of Economic Research, Inc.
- Elhanan Helpman & Assaf Razin & Efraim Sadka (ed.), 1988. "Economic Effects of the Government Budget," MIT Press Books, The MIT Press, edition 1, volume 1, number 026258090x, December.
- Reinhart, Carmen & Vegh, Carlos, 1994. "Intertemporal consumption substitution and inflation stabilization:An empirical investigation," MPRA Paper 13427, University Library of Munich, Germany.
When requesting a correction, please mention this item's handle: RePEc:imf:imfwpa:96/51. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Jim Beardow)or (Hassan Zaidi)
If references are entirely missing, you can add them using this form.