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Calvo, Guillermo.

Credibility and the Dynamics of Stabilization Policy A Basic Framework / Guillermo Calvo. [electronic resource] : Guillermo Calvo. - Washington, D.C. : International Monetary Fund, 1990. - 1 online resource (48 p.) - IMF Working Papers; Working Paper ; No. 90/110 . - IMF Working Papers; Working Paper ; No. 90/110 .

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.

ISBN: 1451945582 : 15.00 USD

ISSN: 1018-5941

Standard No.: 10.5089/9781451945584.001 doi

Subjects--Topical Terms:
Exchange Rate
Exchange Rates
Inflation Rate
Inflation
Real Exchange Rate

Subjects--Geographic Terms:
Argentina