Reinhart, Carmen and Calvo, Guillermo and Vegh, Carlos (1994): Targeting the real exchange rate: Theory and evidence.
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This paper presents a theoretical and empirical analysis of policies aimed at setting a more depreciated level of the real exchange rate. An intertemporal optimizing model suggests that, in the absence of changes in fiscal policy, a more depreciated level of the real exchange can only be attained temporarily. This can be achieved by means of higher inflation and/or higher real interest rates, depending on the degree of capital mobility. Evidence for Brazil, Chile, and Colombia supports the model's prediction that undervalued real exchange rates are associated with higher inflation.
|Item Type:||MPRA Paper|
|Original Title:||Targeting the real exchange rate: Theory and evidence|
|Keywords:||real exchange rate international interest rates capital controls|
|Subjects:||F - International Economics > F3 - International Finance > F30 - General
E - Macroeconomics and Monetary Economics > E4 - Money and Interest Rates
|Depositing User:||Carmen Reinhart|
|Date Deposited:||15. Feb 2009 08:43|
|Last Modified:||12. Feb 2013 09:36|
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