Temporary stabilization: a Fréchet-Weibullextreme value distribution approach
Francisco Venegas-Martínez (),
Ambrosio Ortiz-Ramírez () and
Francisco Ortiz-Arango ()
EconoQuantum, Revista de Economia y Negocios, 2012, vol. 9, issue 1, 35-55
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 diffusionjump process where the expected size of a possible devaluation is supposed to have an extreme value distribution of the Fréchet-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)
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed
Downloads: (external link)
http://econoquantum.cucea.udg.mx/wp-content/upload ... l.-9-n%C3%BAm.-1.pdf (application/pdf)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
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 Negocios is currently edited by Mauricio Ramirez Grajeda
More articles in EconoQuantum, Revista de Economia y Negocios 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 ().