Macroeconomic Implications of Real Exchange Rate Targeting in Developing Countries

Peter Montiel and Jonathan Ostry

IMF Staff Papers, 1991, vol. 38, issue 4, 872-900

Abstract: The macroeconomic effects of a variety of exogenous and policy-induced real disturbances are examined under the assumption that the authorities target the level of the real exchange rate. We first discuss the implications--particularly for inflation and the current account--of targeting the rate at an "overdepreciated" level, and then examine the dynamic response of both output and inflation to a number of shocks. Further applications of the model to fiscal explanations of inflation, high-inflation plateaus, and money-based stabilization programs are also considered.

JEL-codes: F30 F41 (search for similar items in EconPapers)
Date: 1991
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