Are valuation effects desirable from a global perspective?

Pierpaolo Benigno

Journal of Development Economics, 2009, vol. 89, issue 2, 170-180

Abstract: Recent studies have emphasized the role of valuation effects due to exchange rate movements in easing the process of adjustment of the external balance of a country. This paper asks to what extent valuation effects are desirable from a global perspective as a mean to achieve an efficient allocation of resources. In a frictionless world, it is desirable to have large movements in prices and exchange rates. But once a small degree of price rigidity is introduced not only should prices be stabilized but also the response of the exchange rate should be muted. There is a minor role for valuation effects that depends both on the size and composition of assets and liabilities.

Keywords: International; finance; Current; account; Exchange; rate (search for similar items in EconPapers)
Date: 2009
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Citations: View citations in EconPapers (10)

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Working Paper: Are Valuation Effects Desirable from a Global Perspective? (2006)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:deveco:v:89:y:2009:i:2:p:170-180

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