Real Effects of Exchange Rate-Based Stabilization: An Analysis of Competing Theories
This paper uses a unified analytical framework to assess, both qualitatively and quantitatively, the relevance of the different hypotheses that have been proposed to explain the real effects of exchange rate-based stabilizations. The four major hypotheses analyzed are: (i) the supply-side effects associated with an inflation decline; (ii) the perception that the exchange rate peg is temporary; (iii) the fiscal adjustments that tend to accompany the peg; and (iv) the existence of nominal rigidities in wages or prices.
Bernanke, Ben S. and Julio Rotemberg (eds.) NBER Macroeconomics Annual 1995. Cambridge: MIT Press, 1995.
Real Effects of Exchange-Rate-Based Stabilization: An Analysis of Competing Theories, Sergio Rebelo, Carlos A. Vegh. in NBER Macroeconomics Annual 1995, Volume 10, Bernanke and Rotemberg. 1995