Exchange Rate Devaluation: A Monetary Model and Empirical Investigation

Parviz Asheghian and William Foote

Eastern Economic Journal, 1988, vol. 14, issue 2, 181-187

Abstract: This paper uses a monetary approach to examine the impact of change s in the exchange rate, domestic credit, and gros s domestic product on the balance of payments during devaluation episodes of less develope d countries (LDCs) and advanced countries (ACs). Second, it estimates t he relative responsiveness of LDCs and ACs to devaluation. Using a sampl e of twenty-three independent devaluations in LDCs and thirteen independent devaluations in ACs, the analysis suggests several conclusions, two of which are: in the long run, devaluation improves the balance of payments for both ACs and LDCs; and the data cannot corroborate any structural differences between the relative responsiv eness of ACs and LDCs to devaluation in the short run.

Date: 1988
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Persistent link: https://EconPapers.repec.org/RePEc:eej:eeconj:v:14:y:1988:i:2:p:181-187

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