Macroeconomic Implications of Real Exchange Rate Targeting in Developing Countries

Author/Editor:

Peter J Montiel ; Jonathan David Ostry

Publication Date:

March 1, 1991

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 analyzes the macroeconomic effects of a variety of exogenous and policy-induced real disturbances when the authorities target the level of the real exchange rate. It first discusses the implications--particularly for inflation and the current account--of targeting the rate at an “overdepreciated” level. The paper then examines the dynamic response of both output and inflation to a number of shocks. Further applications of the model, particularly as regards fiscal explanations of inflation, high-inflation plateaus, and money-based stabilization programs, are also considered.

Series:

Working Paper No. 1991/029

Subject:

Conventional peg Foreign exchange Inflation International trade Labor Prices Real exchange rates Real wages Terms of trade

Notes:

Analyzes the macroeconomic effects of a variety of exogenous and policy-induced real disturbances when the authorities target the level of the real exchange rate. Also published in Staff Papers, Vol. 38, No. 4, December 1991.

English

Publication Date:

March 1, 1991

ISBN/ISSN:

9781451844702/1018-5941

Stock No:

WPIEA0291991

Pages:

49

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