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Trade Liberalization with a Fixed Exchange Rate

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  • Londero, Elio

Abstract

When the nominal exchange rate is fixed (it cannot be devalued), trade liberalization would normally require a reduction in the absolute prices of non-traded goods in order to obtain the real depreciation needed. This paper analyzes the difficulties in achieving that real depreciation, and the effects of the persistent overvaluation that may result from labor market restrictions and capital inflows. Issues regarding stabilization cum trade liberalization, as well as sequencing with other reforms, are also explored.

Suggested Citation

  • Londero, Elio, 1997. "Trade Liberalization with a Fixed Exchange Rate," MPRA Paper 85340, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:85340
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    File URL: https://mpra.ub.uni-muenchen.de/85340/1/MPRA_paper_85340.pdf
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    References listed on IDEAS

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    1. Rudiger Dornbusch & Sebastian Edwards, 1995. "Reform, Recovery, and Growth: Latin America and the Middle East," NBER Books, National Bureau of Economic Research, Inc, number dorn95-1, February.
    2. Arnold Harberger, 1986. "Economic Adjustment and the Real Exchange Rate," NBER Chapters, in: Economic Adjustment and Exchange Rates in Developing Countries, pages 369-424, National Bureau of Economic Research, Inc.
    3. Agosin, Manuel R. & Ffrench-Davis, Ricardo, 1993. "Trade liberalization in Latin America," Revista CEPAL, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL), August.
    4. Teitel, Simon & Colman Sercovich, Francisco, 1984. "Latin America," World Development, Elsevier, vol. 12(5-6), pages 645-660.
    5. Tybout, James R, 1992. "Linking Trade and Productivity: New Research Directions," World Bank Economic Review, World Bank Group, vol. 6(2), pages 189-211, May.
    6. Edwards, Sebastian, 1993. "Openness, Trade Liberalization, and Growth in Developing Countries," Journal of Economic Literature, American Economic Association, vol. 31(3), pages 1358-1393, September.
    7. Odd Aukrust, 1970. "Prim I: A Model Of The Price And Income Distribution Mechanism Of An Open Economy," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 16(1), pages 51-78, March.
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    Cited by:

    1. Elio Londero, 2001. "The alleged countercyclical nature of Argentina's exports of manufactures," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 10(2), pages 151-173.
    2. Ekanem, Nkanta Frank, 2002. "Differential impact of exchange rate on US trade with two major and two minor trading partners in Africa," Journal of Economics and Business, Elsevier, vol. 54(5), pages 557-571.
    3. Elio Londero, 2003. "Trade liberalization and adjustment in Argentina," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 12(3), pages 225-246.

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    More about this item

    Keywords

    Trade liberalization; adjustment; exchange rate policy; currency board; dollarization;
    All these keywords.

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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