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The Effects of Exchange Rate Fluctuations on Output and Prices: Evidence from Developing Countries

Author/Editor: Kandil, Magda E. | Mirzaie, Ida Aghdas
Authorized for Distribution: October 1, 2003
Electronic Access: Free Full Text (PDF file size is 1,015KB)
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Disclaimer: This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate.

Summary: The paper examines the effects of exchange rate fluctuations on real output and the price level in a sample of 33 developing countries. The theoretical model decomposes movements in the exchange rate into anticipated and unanticipated components. Unanticipated currency fluctuations help to determine aggregate demand through exports, imports, and the demand for domestic currency, and aggregate supply through the cost of imported intermediate goods. Anticipated exchange rate depreciation, through the supply channel, has limited effects on output growth and inflation. Unanticipated currency fluctuations appear more significant, with varying effects on output growth and price inflation across developing countries.
Series: Working Paper No. 03/200
Subject(s): Real effective exchange rates | Inflation | Prices | Economic models
Author's keyword(s): Exchange rate | anticipated vs. unanticipated appreciation | supply vs. demand channels | real and inflationary effects
    Published:   October 1, 2003        
    ISBN/ISSN:   1934-7073   Format:   Paper
    Stock No:   WPIEA2002003   Pages:   31
    Price:   US$15.00
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