Devaluation and pass-through in indebted and risky economies

José García-Solanes () and Fernando Torrejón-Flores

International Review of Economics & Finance, 2010, vol. 19, issue 1, 36-45

Abstract: This paper develops a structural general equilibrium model to analyse the pass-through from devaluation to producer and consumer prices in Emerging Market Economies (EMEs). Simulation analysis shows that balance-sheet effects created by capital market imperfections and the home bias shrink the impact of devaluation on both types of internal prices. This finding helps explain why pass-through to internal prices is low in EMEs. It also shows that, for benchmark values of the parameters, devaluation remains a good device to modify the real exchange rate and to mitigate the negative impact of external shocks in EMEs.

Keywords: Devaluation; Pass-through; Emerging; market; economies (search for similar items in EconPapers)
Date: 2010
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:reveco:v:19:y:2010:i:1:p:36-45

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