Devaluation (levels versus rates) and balance of payments in a cash-in-advance economy

Alberto Petrucci ()

Economics & Statistics Discussion Papers from University of Molise, Department of Economics

Abstract: This paper investigates the consequences of the currency devalution, both in levels and rates, on the balance of payments in a cash-in-advance economy with finite horizons, endogenous capital accumulation and international capital immobility. In this context, a once and for all currency devaluation induces a balance of payments surplus, whereas a sustained increase in the rate of devaluation produces, in principle, an ambiguous effect on the balance of payments. If however non-restrictive assumptions on some structural parameters are made, an increase in the devaluation rate leads to a balance of payments surplus, the exact opposite of Calvo's result (1981).

Keywords: Devaluation; Balance of payments; Cash-in-advance constraint; Overlapping generations. (search for similar items in EconPapers)
JEL-codes: E21 E62 (search for similar items in EconPapers)
Pages: 21 pages
Date: 2003-04-14
New Economics Papers: this item is included in nep-cba, nep-ifn and nep-mon
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http://web.unimol.it/progetti/repec/mol/ecsdps/ESDP03001.pdf (application/pdf)

Related works:
Working Paper: Devaluation (Levels versus Rates) and Balance of Payments in a Cash-in-Advance Economy (2003)
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Persistent link: https://EconPapers.repec.org/RePEc:mol:ecsdps:esdp03001

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