Credibility And The Dynamics Of Stabilization Policy

Author : Mr.Guillermo Calvo
Publisher : International Monetary Fund
ISBN 13 : 1451945582
Total Pages : 48 pages
Book Rating : 4.84/5 ( download)

DOWNLOAD NOW!

Download or read book Credibility and the Dynamics of Stabilization Policy written by Mr.Guillermo Calvo and published by International Monetary Fund. This book was released on 1990-11-01 with total page 48 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper studies price stabilization policy under both predetermined and flexible exchange rates. Under predetermined exchange rates, a non-credible stabilization program results in an initial expansion of output, followed by a later recession. The initial expansion accompanies an appreciating real exchange rate. Under flexible exchange rates, the recession occurs at the beginning of the program. The real exchange rate appreciates sharply on impact but depreciates afterwards. Lack of credibility is more costly under predetermined exchange rates because the real effects are more pronounced.

Author : Pablo E. Guidotti
Publisher :
ISBN 13 :
Total Pages : 0 pages
Book Rating : 4.19/5 ( download)

DOWNLOAD NOW!

Download or read book Losing Credibility written by Pablo E. Guidotti and published by . This book was released on 2001 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: The exchange rate is, by far, the most popular nominal anchor in inflation stabilization programs in developing countries. The credibility associated with exchange rate-based stabilization plans appears to exhibit a distinctive dynamic pattern. Credibility rises in the early stages of these programs as the exchange rate anchor brings about price stability with no real costs, only to fall later on as the recessionary effects of the ensuing real appreciation begin to take hold. In the late stages of such programs--which often fail--credibility seems to fall precipitously, as the question becomes not if but when the program will be abandoned. This paper formalizes this dynamic pattern of credibility. It develops a political economy model that provides a natural definition of credibility and shows how economic and political variables influence credibility. The model assumes that the stabilization plan takes place in two stages. In the first stage, an exchange rate peg is implemented and the fiscal deficit is partially reduced. In the second stage--which may in fact never take place--the fiscal adjustment is completed. After the implementation of the plan, pressure groups negotiate over which group will bear the cost of the taxes needed to close the remaining fiscal gap (i.e., they engage in a war of attrition). At the same time, the real appreciation of the domestic currency leads to expectations of a devaluation, loss of international reserves and, potentially, to a balance of payments crisis. In this context, credibility is defined as the conditional probability that the budget agreement takes place before a balance of payments crisis develops. The paper shows that credibility rises in the early stages of the program, as international reserves are still plenty, interest rates are low, and the public debt has yet to skyrocket. Later, however, crediblity begins to fall, as rising interest rates make it more likely that a balance of payments crisis will take place and a large public debt makes it more costly for political groups to concede. The model thus suggests that if a budget agreement is not reached in the early stages of the plan, the program may quickly lose credibility and end in a full-blown crisis due to the intrinsic dynamics of a two-stage plan.

Author : Mr.Guillermo Calvo
Publisher : International Monetary Fund
ISBN 13 : 1451849915
Total Pages : 34 pages
Book Rating : 4.12/5 ( download)

DOWNLOAD NOW!

Download or read book Exchange-Rate-Based Stabilization under Imperfect Credibility written by Mr.Guillermo Calvo and published by International Monetary Fund. This book was released on 1991-08-01 with total page 34 pages. Available in PDF, EPUB and Kindle. Book excerpt: 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.

Author : Mr.Jorge Roldos
Publisher : International Monetary Fund
ISBN 13 : 1451851340
Total Pages : 26 pages
Book Rating : 4.42/5 ( download)

DOWNLOAD NOW!

Download or read book On Credible Disinflation written by Mr.Jorge Roldos and published by International Monetary Fund. This book was released on 1993-11-01 with total page 26 pages. Available in PDF, EPUB and Kindle. Book excerpt: We study the effects of a credible, gradual exchange rate based disinflation program in a two sector economy. After an initial real exchange rate depreciation, the reductions in the rate of devaluation reduce the monetary wedge generated by a cash in advance constraint, leading to a gradual increase in absorption that yields progressive real exchange rate appreciations and current account deficits. An initial boom in economic activity is not followed by a later contraction, as labor supply expands during the whole length of the program.

Author : Pierre L. Siklos
Publisher : Edward Elgar Publishing
ISBN 13 : 9781781956359
Total Pages : 344 pages
Book Rating : 4.59/5 ( download)

DOWNLOAD NOW!

Download or read book Great Inflations of the 20th Century written by Pierre L. Siklos and published by Edward Elgar Publishing. This book was released on 1995-01-01 with total page 344 pages. Available in PDF, EPUB and Kindle. Book excerpt: '. . . the book contains an interesting collection of articles. . .' - Jan Kakes, De Economist 'In short Pierre Siklos has put together a book that is informative, thought provoking, and fun to read.' - Bruce D. Smith, Journal of Economic History The problems associated with chronically high inflation and hyperinflation continue to preoccupy policy makers and economists. In Great Inflations of the 20th Century, Pierre Siklos has gathered together major papers by a distinguished group of scholars who use historical episodes to understand and explain a key issue.

Author : Oya Celasun
Publisher : International Monetary Fund
ISBN 13 : 1451857055
Total Pages : 35 pages
Book Rating : 4.54/5 ( download)

DOWNLOAD NOW!

Download or read book Sticky Inflation and the Real Effects of Exchange Rate Based Stabilization written by Oya Celasun and published by International Monetary Fund. This book was released on 2003-07-01 with total page 35 pages. Available in PDF, EPUB and Kindle. Book excerpt: 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.

Author : International Monetary Fund. Research Dept.
Publisher : International Monetary Fund
ISBN 13 : 1451973179
Total Pages : 286 pages
Book Rating : 4.74/5 ( download)

DOWNLOAD NOW!

Download or read book IMF Staff papers written by International Monetary Fund. Research Dept. and published by International Monetary Fund. This book was released on 1992-01-01 with total page 286 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper examines market liberalization policies in a reforming socialist economy. The aim of this paper is to develop a model of such a reforming socialist economy and to explore the consequences of market-oriented policies in the context of such an economy. A model of a socialist economy is presented, incorporating bargaining over wages and employment in the socialized sector and shortages that are reflected in the black market. The model is used to analyze the implications of liberalization policies, including trade liberalization, an administered price increase, and provisions allowing for increased direct foreign investment. The nonsocialized sector is perfectly competitive and produces an output that is different from that of the socialized sector. It has a neoclassical production function using a sector-specific input (say, capital) and labor. The results suggest that reforms may have different effects under different trade regimes and that small price reforms may have perverse effects.

Author : Pierre-Richard Agénor
Publisher : Princeton University Press
ISBN 13 : 0691165394
Total Pages : 792 pages
Book Rating : 4.94/5 ( download)

DOWNLOAD NOW!

Download or read book Development Macroeconomics written by Pierre-Richard Agénor and published by Princeton University Press. This book was released on 2015-06-23 with total page 792 pages. Available in PDF, EPUB and Kindle. Book excerpt: The global financial crisis triggered severe shocks for developing countries, whose embrace of greater commercial and financial openness has increased their exposure to external shocks, both real and financial. This new edition of Development Macroeconomics has been fully revised to address the more open and less stable environment in which developing countries operate today. Describing the latest advances in this rapidly changing field, the book features expanded coverage of public debt and the management of capital inflows as well as new material on fiscal discipline, monetary policy regimes, currency, banking and sovereign debt crises, currency unions, and the choice of an exchange-rate regime. A new chapter on dynamic stochastic general equilibrium (DSGE) models with financial frictions has been added to reflect how the financial crisis has reshaped our thinking on the role of such frictions in generating and propagating real and financial shocks. The book also discusses the role of macroprudential regulation, both independently and through its interactions with monetary policy, in preserving financial and macroeconomic stability. Now in its fourth edition, Development Macroeconomics remains the definitive textbook on the macroeconomics of developing countries. The most authoritative book on the subject—now fully revised and expanded Features new material on fiscal discipline, monetary policy regimes, currency, banking and sovereign debt crises, and much more Comes with online supplements on informal financial markets, stabilization programs, the solution of DSGE models with financial frictions, and exchange rate crises

Author : Mr.James John
Publisher : International Monetary Fund
ISBN 13 : 9781557755001
Total Pages : 166 pages
Book Rating : 4.00/5 ( download)

DOWNLOAD NOW!

Download or read book IMF Conditionality written by Mr.James John and published by International Monetary Fund. This book was released on 1995-09-29 with total page 166 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper is part II of a two-volume study conducted as a part of the IMF's ongoing process of evaluating its lending facilities. It focuses on IMF-supported programs and macroeconomic performance during 1988-92, reflecting information available through the end of 1993. Part I (Occasional Paper No. 128) provides an overview of the principal issues and findings and distills the main message for future programs. Part II presents detailed examinations of selected policy issues in five background papers.

Author : Banḳ Yiśraʼel
Publisher : MIT Press
ISBN 13 : 9780262023245
Total Pages : 472 pages
Book Rating : 4.45/5 ( download)

DOWNLOAD NOW!

Download or read book Lessons of Economic Stabilization and Its Aftermath written by Banḳ Yiśraʼel and published by MIT Press. This book was released on 1991 with total page 472 pages. Available in PDF, EPUB and Kindle. Book excerpt: Comprises essays presented at a conference held in Jerusalem in 1990.