Exchange Rate-Based Stabilization: Pleasant Monetary Dynamics?

Gert Wehinger

Department of Economics Working Papers from Vienna University of Economics and Business, Department of Economics

Abstract: High inflation economies have ultimately been successful in stabilising their prices using the exchange rate as a nominal anchor. Besides stabilization, these recent examples have shown boom-recession cycles, contrary to what can be expected from (pure) money-based stabilizations. Various theoretical explanations of such boom-cycles are discussed and a model of aggregate supply and demand generating such an outcome is developed. There the boom dynamics depend mainly on a slump in real interest rates and wage flexibility.

Keywords: Macroeconomic modelling; exchange rate-based stabilization; high inflation; Latin America. (search for similar items in EconPapers)
JEL-codes: E10 E31 E52 E63 (search for similar items in EconPapers)
Date: 1997-08
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Working Paper: Exchange rate-based stabilization. Pleasant monetary dynamics? (1997)
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