Interactions Between Inflation and Trade-Regime Objectives in Stabilization Programs
This paper examines the relationship between macroeconomic objectives of controlling inflation and trade-regime objectives in stabilization programs of developing countries. It is seen that there need be, in principle, no close relationship between the two, as a crawling peg exchange-rate policy can prevent inflation from affecting the performance of the foreign sector. In practice, trade regime objectives have been linked with inflation-reducing objectives, often to the detriment of resource allocation and growth. Differences between devaluation under liberalized regimes and under exchange control are also examined.
Published: Krueger, Anne O. "Interactions Between Inflation and Trade-Regime Objectives in Stabilization Programs." Economic Stabilization in Developing Countries, eds. William R. Cline and Sidney Weintraub. Washington, D.C.: The Brookings Institution, 1981.