When may depreciations fuel inflation? An application to the Spanish case

Enrique Alberola, Juan Ayuso and David Lopez-Salido

Applied Economics, 2000, vol. 32, issue 8, 1037-1049

Abstract: In this paper it is considered that the relationship between nominal exchange rate and prices depends on the nature of the shocks impacting the economy. In order to identify the sources of nominal exchange rate and relative price fluctuations we impose long-run restrictions on the dynamics of these variables through a 2-variable and 3-variable SVAR, respectively. This methodology is applied to data on the Spanish economy and find that supply and real demand shocks move nominal exchange rates and relative prices in opposite directions. Nominal shocks, however, move both variables in the same direction. Thus, in this case, only under nominal shocks may exchange rate depreciations fuel inflation.

Date: 2000
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://www.tandfonline.com/doi/abs/10.1080/000368400322093 (text/html)
Access to full text is restricted to subscribers.

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:taf:applec:v:32:y:2000:i:8:p:1037-1049

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/RAEC20

DOI: 10.1080/000368400322093

Access Statistics for this article

Applied Economics is currently edited by Anita Phillips

More articles in Applied Economics from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().