Anticipated Devaluations.
The effect of a future anticipated devaluation is studied in the context of Sidrauski-type model without capital mobility. When the public is compensated for the real balance effect of the devaluation, the current account deteriorates and the interest rate increases before the devaluation occurs; when the devaluation takes place, the current account turns into surplus and the interest rate suffers a precipitous fall. If the public is not compensated, results are similar after the devaluation, but they may have the opposite sign in the transition. A full characterization is, however, provided. Linkages with policy credibility issues are briefly discussed. Copyright 1989 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.
Year of publication: |
1989
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Authors: | Calvo, Guillermo A |
Published in: |
International Economic Review. - Department of Economics. - Vol. 30.1989, 3, p. 587-606
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Publisher: |
Department of Economics |
Saved in:
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