Modeling Exchange-Rate Passthrough After Large Devaluations

Ariel Tomas Burstein, Martin Eichenbaum () and Sergio Rebelo ()

No 11638, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: 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.

JEL-codes: F31 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dge
Date: 2005-09
Note: EFG IFM
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Related works:
Working Paper: Modeling Exchange Rate Passthrough After Large Devaluations (2005)
Working Paper: Modeling Exchange Rate Passthrough After Large Devaluations (2005)
Journal Article: Modeling exchange rate passthrough after large devaluations (2007)
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