Real Exchange Rates, Devaluation, and Adjustment

Real Exchange Rates, Devaluation, and Adjustment

Author: Sebastian Edwards

Publisher:

Published: 1989

Total Pages: 394

ISBN-13:

DOWNLOAD EBOOK

Real Exchange Rates, Devaluation, and Adjustment provides a unified theoretical and empirical investigation of exchange rate policy and performance in scores of developing countries. It develops a theory of equilibrium and disequilibrium real exchange rates, takes up the question of why devaluations are the most controversial policy measures in poorer nations, and discusses what determines their success or failure. In a lucid fashion, Edwards organizes vast amounts of data on exchange rates - both real and nominal - and discusses their effect on net trade balances, net asset positions, output growth, real wages, and rates of price inflation, analyzed both in time series and through cross country comparisons. Edwards's investigation singles out 39 major devaluation episodes for before and after comparative analyses while simultaneously isolating the separate effects of other important explanatory variables, such as bank credit expansion and changes in the terms of trade. The first part of the book focuses on theoretical models of devaluation and real exchange rate behavior in less developed countries. Special attention is paid to intertemporal channels in the transmission of disturbances. The second part uses a large cross country data set to analyze the way the real exchange rate has behaved in these nations. The data are also used to test the implications of several theories of real exchange rate determination. The third part analyzes actual devaluation experiences between 1962 and 1982. These chapters examine the events leading to a balance of payments crisis and to a devaluation, exploring the relation between macroeconomic disequilibrium, and the imposition of trade and exchange controls. They also investigate the effect of nominal devaluation on key variables such as the balance of payments, the current account, the real exchange rate, real output real wages, and income distribution.


Book Synopsis Real Exchange Rates, Devaluation, and Adjustment by : Sebastian Edwards

Download or read book Real Exchange Rates, Devaluation, and Adjustment written by Sebastian Edwards and published by . This book was released on 1989 with total page 394 pages. Available in PDF, EPUB and Kindle. Book excerpt: Real Exchange Rates, Devaluation, and Adjustment provides a unified theoretical and empirical investigation of exchange rate policy and performance in scores of developing countries. It develops a theory of equilibrium and disequilibrium real exchange rates, takes up the question of why devaluations are the most controversial policy measures in poorer nations, and discusses what determines their success or failure. In a lucid fashion, Edwards organizes vast amounts of data on exchange rates - both real and nominal - and discusses their effect on net trade balances, net asset positions, output growth, real wages, and rates of price inflation, analyzed both in time series and through cross country comparisons. Edwards's investigation singles out 39 major devaluation episodes for before and after comparative analyses while simultaneously isolating the separate effects of other important explanatory variables, such as bank credit expansion and changes in the terms of trade. The first part of the book focuses on theoretical models of devaluation and real exchange rate behavior in less developed countries. Special attention is paid to intertemporal channels in the transmission of disturbances. The second part uses a large cross country data set to analyze the way the real exchange rate has behaved in these nations. The data are also used to test the implications of several theories of real exchange rate determination. The third part analyzes actual devaluation experiences between 1962 and 1982. These chapters examine the events leading to a balance of payments crisis and to a devaluation, exploring the relation between macroeconomic disequilibrium, and the imposition of trade and exchange controls. They also investigate the effect of nominal devaluation on key variables such as the balance of payments, the current account, the real exchange rate, real output real wages, and income distribution.

Economic Adjustment and Exchange Rates in Developing Countries

Economic Adjustment and Exchange Rates in Developing Countries

Author: Sebastian Edwards

Publisher: University of Chicago Press

Published: 2007-12-01

Total Pages: 460

ISBN-13: 0226184730

DOWNLOAD EBOOK

In spite of the attention paid exchange rates in recent economic debates on developing countries, relatively few studies have systematically analyzed in detail the various ramifications of exchange rate policy in these countries. In this new volume from the National Bureau of Economic Research, leading economists use rigorous models to tackle various exchange rate issues, while also illuminating policy implications that emerge from their analyses. The volume, divided into four main sections, addresses: the role of exchange rates in stabilization programs and the adjustment process; the importance of exchange rate policy during liberalization reform in developing countries; exchange rate problems relevant and unique to developing countries, illustrated by case studies; and the problems defining, measuring, and identifying determinants of real exchange rates. Authors of individual papers examine the relation between commercial policies and exchange rates, the role of exchange rate policy in stabilization programs, the effectiveness of devaluations as a policy tool, and the interaction between exchange rate terms of trade an capital flow. This research will not only prove crucial to our understanding of the role of exchange rates in developing countries, but will clearly set the standard for future work in the field.


Book Synopsis Economic Adjustment and Exchange Rates in Developing Countries by : Sebastian Edwards

Download or read book Economic Adjustment and Exchange Rates in Developing Countries written by Sebastian Edwards and published by University of Chicago Press. This book was released on 2007-12-01 with total page 460 pages. Available in PDF, EPUB and Kindle. Book excerpt: In spite of the attention paid exchange rates in recent economic debates on developing countries, relatively few studies have systematically analyzed in detail the various ramifications of exchange rate policy in these countries. In this new volume from the National Bureau of Economic Research, leading economists use rigorous models to tackle various exchange rate issues, while also illuminating policy implications that emerge from their analyses. The volume, divided into four main sections, addresses: the role of exchange rates in stabilization programs and the adjustment process; the importance of exchange rate policy during liberalization reform in developing countries; exchange rate problems relevant and unique to developing countries, illustrated by case studies; and the problems defining, measuring, and identifying determinants of real exchange rates. Authors of individual papers examine the relation between commercial policies and exchange rates, the role of exchange rate policy in stabilization programs, the effectiveness of devaluations as a policy tool, and the interaction between exchange rate terms of trade an capital flow. This research will not only prove crucial to our understanding of the role of exchange rates in developing countries, but will clearly set the standard for future work in the field.

Adjustment, Investment, and the Real Exchange Rate in Developing Countries

Adjustment, Investment, and the Real Exchange Rate in Developing Countries

Author:

Publisher: World Bank Publications

Published:

Total Pages: 49

ISBN-13:

DOWNLOAD EBOOK

LDC adjustment packages Riccardo Faini and Jaime de Melo Developing countries have been hit by a fall in their terms of trade, high real interest rates on their external debt, and a drought in commercial lending from abroad. Their subsequent adjustment packages, often supported by loans from the IMF and World Bank, focused on a sharp real exchange rate depreciation to restore external balance and a host of microeconomic reforms to secure a simultaneous supply-side improvement. This paper examines the success of these ‘adjustment with growth' packages in a large sample of developing countries. We find these packages have been much more successful in LDCs which export manufactures than they have in those concentrating on primary exports (primarily low-income African countries); the latter have not resumed sustainable growth, and most of their external adjustment has arisen from expenditure reduction, not an increase in supply. The longer-term prospects for manufacturing exporters are also brighter: there we detect signs of increased efficiency and a smaller decline in investment than in primary exporters. But we also find that a high external debt burden and an unstable macroeconomic environment impede investment in all LDCs. In the longer term, adjustment with growth packages will succeed only if they are accompanied by a more stable macroeconomic environment and appropriate debt relief


Book Synopsis Adjustment, Investment, and the Real Exchange Rate in Developing Countries by :

Download or read book Adjustment, Investment, and the Real Exchange Rate in Developing Countries written by and published by World Bank Publications. This book was released on with total page 49 pages. Available in PDF, EPUB and Kindle. Book excerpt: LDC adjustment packages Riccardo Faini and Jaime de Melo Developing countries have been hit by a fall in their terms of trade, high real interest rates on their external debt, and a drought in commercial lending from abroad. Their subsequent adjustment packages, often supported by loans from the IMF and World Bank, focused on a sharp real exchange rate depreciation to restore external balance and a host of microeconomic reforms to secure a simultaneous supply-side improvement. This paper examines the success of these ‘adjustment with growth' packages in a large sample of developing countries. We find these packages have been much more successful in LDCs which export manufactures than they have in those concentrating on primary exports (primarily low-income African countries); the latter have not resumed sustainable growth, and most of their external adjustment has arisen from expenditure reduction, not an increase in supply. The longer-term prospects for manufacturing exporters are also brighter: there we detect signs of increased efficiency and a smaller decline in investment than in primary exporters. But we also find that a high external debt burden and an unstable macroeconomic environment impede investment in all LDCs. In the longer term, adjustment with growth packages will succeed only if they are accompanied by a more stable macroeconomic environment and appropriate debt relief

Large Devaluations and the Real Exchange Rate

Large Devaluations and the Real Exchange Rate

Author: Ariel T. Burstein

Publisher:

Published: 2004

Total Pages: 66

ISBN-13:

DOWNLOAD EBOOK

"In this paper we argue that the primary force behind the large drop in real exchange rates that occurs after large devaluations is the slow adjustment in the price of nontradable goods and services. Our empirical analysis uses data from five large devaluation episodes: Argentina (2001), Brazil (1999), Korea (1997), Mexico (1994), and Thailand (1997). We conduct a detailed analysis of the Argentina case using disaggregated CPI data, data from our own survey of prices in Buenos Aires, and scanner data from supermarkets. We assess the robustness of our findings by studying large real-exchange-rate appreciations, medium devaluations, and small exchange-rate movements"--National Bureau of Economic Research web site.


Book Synopsis Large Devaluations and the Real Exchange Rate by : Ariel T. Burstein

Download or read book Large Devaluations and the Real Exchange Rate written by Ariel T. Burstein and published by . This book was released on 2004 with total page 66 pages. Available in PDF, EPUB and Kindle. Book excerpt: "In this paper we argue that the primary force behind the large drop in real exchange rates that occurs after large devaluations is the slow adjustment in the price of nontradable goods and services. Our empirical analysis uses data from five large devaluation episodes: Argentina (2001), Brazil (1999), Korea (1997), Mexico (1994), and Thailand (1997). We conduct a detailed analysis of the Argentina case using disaggregated CPI data, data from our own survey of prices in Buenos Aires, and scanner data from supermarkets. We assess the robustness of our findings by studying large real-exchange-rate appreciations, medium devaluations, and small exchange-rate movements"--National Bureau of Economic Research web site.

Misalignment of Exchange Rates

Misalignment of Exchange Rates

Author: Richard C. Marston

Publisher: University of Chicago Press

Published: 2008-04-15

Total Pages: 332

ISBN-13: 0226507254

DOWNLOAD EBOOK

Economists writing on flexible exchange rates in the 1960s foresaw neither the magnitude nor the persistence of the changes in real exchange rates that have occurred in the last fifteen years. Unexpectedly large movements in relative prices have lead to sharp changes in exports and imports, disrupting normal trading relations and causing shifts in employment and output. Many of the largest changes are not equilibrium adjustments to real disturbances but represent instead sustained departures from long-run equilibrium levels, with real exchange rates remaining "misaligned" for years at a time. Contributors to Misalignment of Exchange Rates address a series of questions about misalignment. Several papers investigate the causes of misalignment and the extent to which observed movements in real exchange rates can be attributed to misalignment. These studies are conducted both empirically, through the experiences of the United States, Great Britain, Japan, and the countries of the European Monetary System, and theoretically, through models of imperfect competition. Attention is then turned to the effects of misalignment, especially on employment and production, and to detailed estimates of the effects of changes in exchange rates on several industries, including the U.S. auto industry. In response to the contention that there is significant "hysteresis" in the adjustment of employment and production to changes in exchange rates, contributors also attempt to determine whether the effects of misalignment can be reversed once exchange rates return to earlier levels. Finally, the issue of how to avoid—or at least control—misalignment through macroeconomic policy is confronted.


Book Synopsis Misalignment of Exchange Rates by : Richard C. Marston

Download or read book Misalignment of Exchange Rates written by Richard C. Marston and published by University of Chicago Press. This book was released on 2008-04-15 with total page 332 pages. Available in PDF, EPUB and Kindle. Book excerpt: Economists writing on flexible exchange rates in the 1960s foresaw neither the magnitude nor the persistence of the changes in real exchange rates that have occurred in the last fifteen years. Unexpectedly large movements in relative prices have lead to sharp changes in exports and imports, disrupting normal trading relations and causing shifts in employment and output. Many of the largest changes are not equilibrium adjustments to real disturbances but represent instead sustained departures from long-run equilibrium levels, with real exchange rates remaining "misaligned" for years at a time. Contributors to Misalignment of Exchange Rates address a series of questions about misalignment. Several papers investigate the causes of misalignment and the extent to which observed movements in real exchange rates can be attributed to misalignment. These studies are conducted both empirically, through the experiences of the United States, Great Britain, Japan, and the countries of the European Monetary System, and theoretically, through models of imperfect competition. Attention is then turned to the effects of misalignment, especially on employment and production, and to detailed estimates of the effects of changes in exchange rates on several industries, including the U.S. auto industry. In response to the contention that there is significant "hysteresis" in the adjustment of employment and production to changes in exchange rates, contributors also attempt to determine whether the effects of misalignment can be reversed once exchange rates return to earlier levels. Finally, the issue of how to avoid—or at least control—misalignment through macroeconomic policy is confronted.

Fundamental Determinants of Exchange Rates

Fundamental Determinants of Exchange Rates

Author: Jerome L. Stein

Publisher: Oxford University Press

Published: 1997

Total Pages: 273

ISBN-13: 0198293062

DOWNLOAD EBOOK

Neo-classical in its stress on fundamentals that drive a real economy, this study also offers an alternative paradigm to describe and explain short-run movements of nominal exchange rates.


Book Synopsis Fundamental Determinants of Exchange Rates by : Jerome L. Stein

Download or read book Fundamental Determinants of Exchange Rates written by Jerome L. Stein and published by Oxford University Press. This book was released on 1997 with total page 273 pages. Available in PDF, EPUB and Kindle. Book excerpt: Neo-classical in its stress on fundamentals that drive a real economy, this study also offers an alternative paradigm to describe and explain short-run movements of nominal exchange rates.

Exchange Rate Policy, the Real Exchange Rate and Inflation

Exchange Rate Policy, the Real Exchange Rate and Inflation

Author: Miguel Alberto Kiguel

Publisher: World Bank Publications

Published: 1992

Total Pages: 35

ISBN-13:

DOWNLOAD EBOOK


Book Synopsis Exchange Rate Policy, the Real Exchange Rate and Inflation by : Miguel Alberto Kiguel

Download or read book Exchange Rate Policy, the Real Exchange Rate and Inflation written by Miguel Alberto Kiguel and published by World Bank Publications. This book was released on 1992 with total page 35 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Exchange Rates, Domestic Prices, and the Adjustment Process

Exchange Rates, Domestic Prices, and the Adjustment Process

Author: Peter B. Kenen

Publisher:

Published: 1980

Total Pages: 58

ISBN-13:

DOWNLOAD EBOOK


Book Synopsis Exchange Rates, Domestic Prices, and the Adjustment Process by : Peter B. Kenen

Download or read book Exchange Rates, Domestic Prices, and the Adjustment Process written by Peter B. Kenen and published by . This book was released on 1980 with total page 58 pages. Available in PDF, EPUB and Kindle. Book excerpt:

The Distributional Consequences of Real Exchange Rate Adjustment

The Distributional Consequences of Real Exchange Rate Adjustment

Author: Mr.Vladimir Klyuev

Publisher: International Monetary Fund

Published: 2003-06-01

Total Pages: 37

ISBN-13: 1451855516

DOWNLOAD EBOOK

The paper focuses on distributional consequences of macroeconomic adjustment. The preferences of economic agents over the level of the real exchange rate derived from standard models are monotonic, with agents favoring either an infinitely appreciated or depreciated rate. To generate less extreme preferences, a model is presented where appreciation would depress economic activity, while a large depreciation would hit the tradable sector by limiting the availability of labor, offsetting the favorable price effect. The model is in the spirit of the dependent economy model, but built on explicit microfoundations. The results can be used to analyze political economy aspects of macroeconomic adjustment.


Book Synopsis The Distributional Consequences of Real Exchange Rate Adjustment by : Mr.Vladimir Klyuev

Download or read book The Distributional Consequences of Real Exchange Rate Adjustment written by Mr.Vladimir Klyuev and published by International Monetary Fund. This book was released on 2003-06-01 with total page 37 pages. Available in PDF, EPUB and Kindle. Book excerpt: The paper focuses on distributional consequences of macroeconomic adjustment. The preferences of economic agents over the level of the real exchange rate derived from standard models are monotonic, with agents favoring either an infinitely appreciated or depreciated rate. To generate less extreme preferences, a model is presented where appreciation would depress economic activity, while a large depreciation would hit the tradable sector by limiting the availability of labor, offsetting the favorable price effect. The model is in the spirit of the dependent economy model, but built on explicit microfoundations. The results can be used to analyze political economy aspects of macroeconomic adjustment.

Exchange Rate Misalignment in Developing Countries

Exchange Rate Misalignment in Developing Countries

Author: Sebastian Edwards

Publisher: Johns Hopkins University Press

Published: 1988

Total Pages: 110

ISBN-13:

DOWNLOAD EBOOK

This article analyzes the theory of equilibrium real exchange rates and defines misalignment as a deviation of the real exchange rate (RER) from its equilibrium level. The role of macroeconomic policies is then analyzed under three alternative nominal exchange rate regimes: predetermined nominal exchange rates; floating nominal rates; and dual or black market nominal exchange rates. This discussion points out how inconsistent macroeconomic policies often lead to real exchange rate misalignment. Corrective measures, including nominal devaluation and several alternative approaches, are then evaluated.


Book Synopsis Exchange Rate Misalignment in Developing Countries by : Sebastian Edwards

Download or read book Exchange Rate Misalignment in Developing Countries written by Sebastian Edwards and published by Johns Hopkins University Press. This book was released on 1988 with total page 110 pages. Available in PDF, EPUB and Kindle. Book excerpt: This article analyzes the theory of equilibrium real exchange rates and defines misalignment as a deviation of the real exchange rate (RER) from its equilibrium level. The role of macroeconomic policies is then analyzed under three alternative nominal exchange rate regimes: predetermined nominal exchange rates; floating nominal rates; and dual or black market nominal exchange rates. This discussion points out how inconsistent macroeconomic policies often lead to real exchange rate misalignment. Corrective measures, including nominal devaluation and several alternative approaches, are then evaluated.