When are devaluations more contractionary? A Quantile VAR estimation for Argentina

Gabriel Montes-Rojas () and Nicolás Bertholet ()

No 185, Working Papers from Red Nacional de Investigadores en Economía (RedNIE)

Abstract: This paper presents empirical evidence on the short- and medium-run contractionary effects of exchange rate shocks and currency devaluations for bimonetary (i. e., highly dollarized) countries. In particular, for Argentina for the period January 2004-December 2018. Using a VAR representation with quantile heterogeneity, it implements a multivariate model with four macroeconomic variables: exchange rate variations, inflation, economic activity and nominal wage growth. The empirical results show a 30% price pass-through effects and a bimodal effect on output, with both positive and negative effects. Wages adjust less than prices with the consequent effect that real wages have a negative elasticity of 0.23 with respect to exchange rate shocks. Further analysis on the multivariate responses show that the negative effect on output is associated with a decline in real wages: a 1% fall in real wages after a currency devaluation produces a 2.3% decline in output.

JEL-codes: C13 C14 C22 (search for similar items in EconPapers)
Pages: 38 pages
Date: 2022-10
New Economics Papers: this item is included in nep-mon and nep-opm
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https://rednie.eco.unc.edu.ar/files/DT/185.pdf (application/pdf)

Related works:
Chapter: When are devaluations more contractionary? A quantile VAR estimation for Argentina (2023)
Working Paper: WHEN ARE DEVALUATIONS MORE CONTRACTIONARY? A QUANTILE VAR ESTIMATION FOR ARGENTINA (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:aoz:wpaper:185

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