The Business Cycle Associated with Exchange-rate-based Stabilization
Title | The Business Cycle Associated with Exchange-rate-based Stabilization PDF eBook |
Author | Miguel Alberto Kiguel |
Publisher | World Bank Publications |
Pages | 59 |
Release | 1990 |
Genre | Business cycles |
ISBN |
Disinflation programs in chronic inflation countries do not normally follow the usual Phillips curve tradeoff in the medium run. Instead of having a sharp recession in the early stage of stabilization, there often is an initial expansion of output followed by a recession and balance of payments difficulties. This pattern is related to programs that use the exchange rate as an instrument of disinflation.
Exchange-Rate-Based Stabilization under Imperfect Credibility
Title | Exchange-Rate-Based Stabilization under Imperfect Credibility PDF eBook |
Author | Mr.Guillermo Calvo |
Publisher | International Monetary Fund |
Pages | 34 |
Release | 1991-08-01 |
Genre | Business & Economics |
ISBN | 1451849915 |
This paper analyzes stabilization policy under predetermined exchange rates in a cash-in-advance, staggered-prices model. Under full credibility, a reduction in the rate of devaluation results in an immediate and permanent reduction in the inflation rate, with no effect on output or consumption. In contrast, a non-credible stabilization results in an initial expansion of output, followed by a later recession. The inflation rate of home goods remains above the rate of devaluation throughout the program, thus resulting in a sustained real exchange rate appreciation.
Sticky Inflation and the Real Effects of Exchange Rate Based Stabilization
Title | Sticky Inflation and the Real Effects of Exchange Rate Based Stabilization PDF eBook |
Author | Oya Celasun |
Publisher | International Monetary Fund |
Pages | 35 |
Release | 2003-07-01 |
Genre | Business & Economics |
ISBN | 1451857055 |
Exchange rate-based inflation stabilization (ERBS) policies are associated with a boom-recession cycle in economic activity and sustained real exchange rate appreciation. A class of models in the literature has explained these empirical regularities with the lack of credibility of the stabilization plans. The lack-of-credibility models typically assume perfectly forward-looking pricing behavior without inflation stickiness and attribute the slow decline in inflation to the consumption boom that occurs due to the perceived temporariness of the ERBS policy. This paper tests the empirical validity of forward-looking pricing behavior in Mexico and Turkey, two countries which have experienced ERBS. It finds that the forward- and backward-looking components of inflation weigh approximately equally in pricing behavior, and therefore, that inflation is partially sticky. The paper then develops the theoretical implications of partial inflation stickiness in a lack of credibility model of ERBS and concludes that the presence of stickiness significantly reduces the persistence of the consumption boom predicted by the model, but helps to explain the recession in the late phase of the stabilization.
NBER Macroeconomics Annual 1995
Title | NBER Macroeconomics Annual 1995 PDF eBook |
Author | Ben S. Bernanke |
Publisher | MIT Press |
Pages | 364 |
Release | 1996 |
Genre | Business & Economics |
ISBN | 9780262522052 |
Contents : Wage Inequality and Regional Unemployment Persistence: U.S. vs. Europe, Guiseppe BErtola and Andreas Ichino. Capital Utilization and Returns to Scale, Craig Burnside, Martin Eichenbaum, and Sergio Rebelo. Banks and Derivatives, Gary Gorton and Richard Rosen. Exchange-Rate-Based Stabilizations: Theory and Evidence, Sergio Rebelo and Carlos Vegh. Inflation Indicators and Inflation Policy, Stephen Cecchetti. Recent Central Bank Reforms and the Role of Price Stability as the Sole Objective of Monetary Policy, Carl Walsh. Is Central Bank Independence (and Low Inflation) the Result of Effective Financial Opposition to Inflation?, Adam Posen. The Unending Quest for Monetary Salvation, Stanley Fischer.
Exchange-Rate-Based Stabilization
Title | Exchange-Rate-Based Stabilization PDF eBook |
Author | Mr.A. Javier Hamann |
Publisher | International Monetary Fund |
Pages | 29 |
Release | 1999-10-01 |
Genre | Business & Economics |
ISBN | 1451855362 |
Do exchange-rate-based stabilizations generate distinctive economic dynamics? To address this question, this paper identifies stabilization episodes using criteria that differ from those in previous empirical studies of exchange-rate-based stabilizations. We find that, while some differences can be detected between exchange-rate-based stabilizations and stabilizations where the exchange rate is not the anchor, the behavior of important variables does not appear to differ—especially output growth, which is good in both cases. There is also no evidence that fiscal discipline is enhanced by adopting an exchange-rate anchor, or that there are any systematic differences in the success records of stabilizations that use the exchange rate as a nominal anchor and those that do not.
Fiscal Policy and the Business Cycle Associated with Exchange Rate-based Stabilizations
Title | Fiscal Policy and the Business Cycle Associated with Exchange Rate-based Stabilizations PDF eBook |
Author | Ernesto Talvi |
Publisher | |
Pages | 46 |
Release | 1995 |
Genre | Business cycles |
ISBN |
Hysteresis and Business Cycles
Title | Hysteresis and Business Cycles PDF eBook |
Author | Ms.Valerie Cerra |
Publisher | International Monetary Fund |
Pages | 50 |
Release | 2020-05-29 |
Genre | Business & Economics |
ISBN | 1513536990 |
Traditionally, economic growth and business cycles have been treated independently. However, the dependence of GDP levels on its history of shocks, what economists refer to as “hysteresis,” argues for unifying the analysis of growth and cycles. In this paper, we review the recent empirical and theoretical literature that motivate this paradigm shift. The renewed interest in hysteresis has been sparked by the persistence of the Global Financial Crisis and fears of a slow recovery from the Covid-19 crisis. The findings of the recent literature have far-reaching conceptual and policy implications. In recessions, monetary and fiscal policies need to be more active to avoid the permanent scars of a downturn. And in good times, running a high-pressure economy could have permanent positive effects.