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Végh Gramont, Carlos A.

Targeting the Real Exchange Rate Theory and Evidence / Carlos A Végh Gramont. [electronic resource] : Carlos A Végh Gramont. - Washington, D.C. : International Monetary Fund, 1994. - 1 online resource (50 p.) - IMF Working Papers; Working Paper ; No. 94/22 . - IMF Working Papers; Working Paper ; No. 94/22 .

This paper presents a theoretical and empirical analysis of policies aimed at setting a more depreciated level of the real exchange rate. An intertemporal optimizing model suggests that, in the absence of changes in fiscal policy, a more depreciated level of the real exchange can only be attained temporarily. This can be achieved by means of higher inflation and/or higher real interest rates, depending on the degree of capital mobility. Evidence for Brazil, Chile, and Colombia supports the model's prediction that undervalued real exchange rates are associated with higher inflation.

ISBN: 1451921217 : 15.00 USD

ISSN: 1018-5941

Standard No.: 10.5089/9781451921212.001 doi

Subjects--Topical Terms:
Exchange Rate
Inflation Tax
Nominal Interest Rate
Real Exchange Rate

Subjects--Geographic Terms:
Brazil
Chile
Colombia