Modeling exchange-rate passthrough after large devaluations
By: Ariel Burstein, Martin Eichenbaum, Sergio Rebelo.
Contributors: Eichenbaum, Martin S.; Rebelo, Sergio.; National Bureau of Economic Research.
Series: NBER working paper series ;; working paper 11638; Working paper series (National Bureau of Economic Research : Online) ;; working paper no. 11638.
Publisher: National Bureau of Economic Research
Published: 2005
Place of publication: Cambridge, MA
Language: eng
Format: Electronic resource
Subjects: Foreign exchange rates -- Mathematical models.; Devaluation of currency -- Mathematical models.
Description: "Large devaluations are generally associated with large declines in real exchange rates.  We develop a model which embodies two complementary forces that account for the large declines in the real exchange rate that occur in the aftermath of large devaluations.  The first force is sticky nontradable-goods prices.  The second force is the impact of real shocks that often accompany large devaluations.  We argue that sticky nontradable goods prices generally play an important role in explaining post-devaluation movements in real exchange rates.  However, real shocks can sometimes be primary drivers of real exchange-rate movements"--National Bureau of Economic Research web site.
Notes: Includes bibliographical references.
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