Real Exchange Rate Targeting Under Imperfect Asset Substitutability

April 1, 1993

Preview Citation

Format: Chicago

José Saúl Lizondo. Real Exchange Rate Targeting Under Imperfect Asset Substitutability, (USA: International Monetary Fund, 1993) accessed November 8, 2024

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

This paper presents a model of an economy that uses nominal exchange rate policy to keep the real exchange rate constant at a certain target level, under imperfect asset substitutability. The paper discusses the determinants of inflation under such a policy, and examines the consequences of exogenous and policy-induced shocks on inflation, the external accounts, and the fiscal accounts. The shocks considered include changes in the real exchange rate target, changes in fiscal policy, changes in foreign interest rates, and open market sales of public sector domestic bonds.

Subject: Expenditure, Inflation, Public sector, Real exchange rates, Real interest rates

Keywords: Central bank, Private sector demand, Rate of inflation, Traded goods, WP

Publication Details

Pages:

30
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 1993/038
Stock No:

WPIEA0381993
ISBN:

9781451845624
ISSN:

1018-5941

Notes

Also published in Staff Papers, Vol. 40, No. 4, December 1993.

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