Temporary stabilization: a Frechet-Weibullextreme value distribution approach

Francisco Venegas-Martínez, Ambrosio Ortiz-Ramirez () and Francisco Ortiz-Arango ()
Additional contact information
Ambrosio Ortiz-Ramirez: Instituto Politecnico Nacional

EconoQuantum, Revista de Economia y Finanzas, 2012, vol. 9, issue 1, 35-55

Abstract: This paper develops, in a small open economy of pure exchange framework, a stochastic model of exchange-rate-based inflation stabilization plan that is expected to be temporary. Agents have expectations of devaluation driven by a mixed diffusion-jump process where the expected size of a possible devaluation is supposed to have an extreme value distribution of the Frechet-Weibull type. Consumption and wealth equilibrium dynamics are examined when such a stabilization plan is implemented. It is assumed that financial markets are incomplete, that is, there are more risk factors than risky assets. Finally, the effects of exogenous shocks on economic welfare are assessed.

Keywords: inflation stabilization; extreme values (search for similar items in EconPapers)
JEL-codes: F31 F41 (search for similar items in EconPapers)
Date: 2012
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://econoquantum.cucea.udg.mx/index.php/EQ/article/view/136 (application/pdf)
http://econoquantum.cucea.udg.mx/index.php/EQ/issue/view/21

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:qua:journl:v:9:y:2012:i:1:p:35-55

Access Statistics for this article

EconoQuantum, Revista de Economia y Finanzas is currently edited by Isai Guizar Mateos

More articles in EconoQuantum, Revista de Economia y Finanzas from Universidad de Guadalajara, Centro Universitario de Ciencias Economico Administrativas, Departamento de Metodos Cuantitativos y Maestria en Economia. Contact information at EDIRC.
Bibliographic data for series maintained by Sandra Ivett Portugal Padilla ().