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This paper shows that some key stylized facts of exchange-rate-based stabilization plans can be explained by the uncertain duration of the plans themselves. Uncertain duration is modeled to reflect evidence showing that devaluation probabilities are higher when the plans are introduced and...
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This paper shows that the risk of devaluation can be an important factor accounting for the stylized facts of exchange … tax induces endogenous state-contingent wealth effects via fiscal adjustment and suboptimal investment. Devaluation risk …
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