
Exchange Rate-based Stabilizations Often Result In An Initial Output Expansion. One Explanation For This Phenomenon Has Been That, In The Presence Of Inflation Inertia, A Reduction In The Nominal Interest Rate Causes The Domestic Real Interest Rate To Fall, Thus Increasing Aggregate Demand. This Paper Reexamines This Issue In The Context Of An Intertemporal Optimizing Model. In Contrast To Previous Results, The Analysis Shows That, If The Intertemporal Elasticity Of Substitution Is Smaller Than The Elasticity Of Substitution Between Traded And Home Goods, A Permanent Reduction In The Rate Of Devaluation Leads To A Fall In Aggregate Demand. Carlos Végh Gramont, Guillermo Calvo. Bibliographic Level Mode Of Issuance: Monograph English
Page Count:
0
Publication Date:
1993-01-01
ISBN-10:
145523219X
ISBN-13:
9781455232192
No comments yet. Be the first to share your thoughts!