Download or read book Credibility and the Dynamics of Stabilization Policy written by Mr.Guillermo Calvo and published by International Monetary Fund. This book was released on 1990-11-01 with total page 48 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper studies price stabilization policy under both predetermined and flexible exchange rates. Under predetermined exchange rates, a non-credible stabilization program results in an initial expansion of output, followed by a later recession. The initial expansion accompanies an appreciating real exchange rate. Under flexible exchange rates, the recession occurs at the beginning of the program. The real exchange rate appreciates sharply on impact but depreciates afterwards. Lack of credibility is more costly under predetermined exchange rates because the real effects are more pronounced.

Download or read book Credibility and the dynamics of stabilization policy a basic framework written by Guillermo A.; Vegh Calvo (Carlos A.) and published by . This book was released on 2004 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book CREDIBILITY AND THE DYNAMICS OF STABILIZATION POLICY A BASIC FRAMEWORK written by Guillermo Antonio CALVO and published by . This book was released on 1990 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Credibility and the Dynamics of Stabilization Policy written by Carlos Végh and published by . This book was released on 2006 with total page 48 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper studies price stabilization policy under both predetermined and flexible exchange rates. Under predetermined exchange rates, a non-credible stabilization program results in an initial expansion of output, followed by a later recession. The initial expansion accompanies an appreciating real exchange rate. Under flexible exchange rates, the recession occurs at the beginning of the program. The real exchange rate appreciates sharply on impact but depreciates afterwards. Lack of credibility is more costly under predetermined exchange rates because the real effects are more pronounced.

Download or read book Losing Credibility written by Pablo E. Guidotti and published by . This book was released on 2001 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: The exchange rate is, by far, the most popular nominal anchor in inflation stabilization programs in developing countries. The credibility associated with exchange rate-based stabilization plans appears to exhibit a distinctive dynamic pattern. Credibility rises in the early stages of these programs as the exchange rate anchor brings about price stability with no real costs, only to fall later on as the recessionary effects of the ensuing real appreciation begin to take hold. In the late stages of such programs--which often fail--credibility seems to fall precipitously, as the question becomes not if but when the program will be abandoned. This paper formalizes this dynamic pattern of credibility. It develops a political economy model that provides a natural definition of credibility and shows how economic and political variables influence credibility. The model assumes that the stabilization plan takes place in two stages. In the first stage, an exchange rate peg is implemented and the fiscal deficit is partially reduced. In the second stage--which may in fact never take place--the fiscal adjustment is completed. After the implementation of the plan, pressure groups negotiate over which group will bear the cost of the taxes needed to close the remaining fiscal gap (i.e., they engage in a war of attrition). At the same time, the real appreciation of the domestic currency leads to expectations of a devaluation, loss of international reserves and, potentially, to a balance of payments crisis. In this context, credibility is defined as the conditional probability that the budget agreement takes place before a balance of payments crisis develops. The paper shows that credibility rises in the early stages of the program, as international reserves are still plenty, interest rates are low, and the public debt has yet to skyrocket. Later, however, crediblity begins to fall, as rising interest rates make it more likely that a balance of payments crisis will take place and a large public debt makes it more costly for political groups to concede. The model thus suggests that if a budget agreement is not reached in the early stages of the plan, the program may quickly lose credibility and end in a full-blown crisis due to the intrinsic dynamics of a two-stage plan.

Download or read book Testing for Credibility Effects written by Mr.Mark P. Taylor and published by International Monetary Fund. This book was released on 1991-11-01 with total page 33 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper examines some recent techniques designed to draw inferences about the credibility of changes in macroeconomic policy regimes. An alternative two-step approach, based on the decomposition between permanent and transitory components of a "credibility variable" is proposed. The methodology is then used to test for the existence of a credibility effect in the Cruzado stabilization plan implemented in Brazil in 1986.

Download or read book Losing Credibility written by Mr.Pablo Emilio Guidotti and published by International Monetary Fund. This book was released on 1992-09-01 with total page 44 pages. Available in PDF, EPUB and Kindle. Book excerpt: In exchange rate-based stabilization programs, credibility often follows a distinct time pattern. At first it rises as the highly visible nominal anchor provides a sense of stability and hopes run high for a permanent solution to the fiscal problems. Later, as the domestic currency appreciates in real terms and the fiscal problems are not fully resolved, the credibility of the program falls, sometimes precipitously. This paper develops a political-economy model that focuses on the evolution of credibility over time, and is consistent with the pattern just described. Inflation inertia and costly budget negotiations play a key role in the model.

Download or read book On Credible Disinflation written by Mr.Jorge Roldos and published by International Monetary Fund. This book was released on 1993-11-01 with total page 26 pages. Available in PDF, EPUB and Kindle. Book excerpt: We study the effects of a credible, gradual exchange rate based disinflation program in a two sector economy. After an initial real exchange rate depreciation, the reductions in the rate of devaluation reduce the monetary wedge generated by a cash in advance constraint, leading to a gradual increase in absorption that yields progressive real exchange rate appreciations and current account deficits. An initial boom in economic activity is not followed by a later contraction, as labor supply expands during the whole length of the program.

Download or read book Exchange Rate Based Stabilization under Imperfect Credibility written by Mr.Guillermo Calvo and published by International Monetary Fund. This book was released on 1991-08-01 with total page 34 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper analyzes stabilization policy under predetermined exchange rates in a cash-in-advance, staggered-prices model. Under full credibility, a reduction in the rate of devaluation results in an immediate and permanent reduction in the inflation rate, with no effect on output or consumption. In contrast, a non-credible stabilization results in an initial expansion of output, followed by a later recession. The inflation rate of home goods remains above the rate of devaluation throughout the program, thus resulting in a sustained real exchange rate appreciation.

Download or read book Imperfect Credibility Versus No Credibility of Optimal Monetary Policy written by Jean-Bernard Chatelain and published by . This book was released on 2020 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: A minimal central bank credibility, with a non-zero probability of not renegning his commitment ("quasi-commitment"), is a necessary condition for anchoring inflation expectations and stabilizing inflation dynamics. By contrast, a complete lack of credibility, with the certainty that the policy maker will renege his commitment ("optimal discretion"), leads to the local instability of inflation dynamics. In the textbook example of the new-Keynesian Phillips curve, the response of the policy instrument to inflation gaps for optimal policy under quasi-commitment has an opposite sign than in optimal discretion, which explains this bifurcation.

Download or read book IMF Staff papers written by International Monetary Fund. Research Dept. and published by International Monetary Fund. This book was released on 1996-01-01 with total page 208 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper examines the role of the labor market in the transmission process of adjustment policies in developing countries. It begins by reviewing the recent evidence regarding the functioning of these markets. It then studies the implications of wage inertia, nominal contracts, labor market segmentation, and impediments to labor mobility for stabilization policies. The effect of labor market reforms on the flexibility of the labor market and the evidence regarding the wage and employment effects of trade reform are discussed next. The last part of the paper identifies a variety of issues that may require further investigation.

Download or read book Stabilization Policies Credibility and Interest Rate Determination in a Small Open Economy written by Torben m Andersen and published by . This book was released on 1987 with total page 13 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Development Macroeconomics written by Pierre-Richard Agénor and published by Princeton University Press. This book was released on 2015-06-23 with total page 792 pages. Available in PDF, EPUB and Kindle. Book excerpt: The global financial crisis triggered severe shocks for developing countries, whose embrace of greater commercial and financial openness has increased their exposure to external shocks, both real and financial. This new edition of Development Macroeconomics has been fully revised to address the more open and less stable environment in which developing countries operate today. Describing the latest advances in this rapidly changing field, the book features expanded coverage of public debt and the management of capital inflows as well as new material on fiscal discipline, monetary policy regimes, currency, banking and sovereign debt crises, currency unions, and the choice of an exchange-rate regime. A new chapter on dynamic stochastic general equilibrium (DSGE) models with financial frictions has been added to reflect how the financial crisis has reshaped our thinking on the role of such frictions in generating and propagating real and financial shocks. The book also discusses the role of macroprudential regulation, both independently and through its interactions with monetary policy, in preserving financial and macroeconomic stability. Now in its fourth edition, Development Macroeconomics remains the definitive textbook on the macroeconomics of developing countries. The most authoritative book on the subject—now fully revised and expanded Features new material on fiscal discipline, monetary policy regimes, currency, banking and sovereign debt crises, and much more Comes with online supplements on informal financial markets, stabilization programs, the solution of DSGE models with financial frictions, and exchange rate crises

Download or read book Active Stabilization Policy and the Credibility of Policy Announcements Under Asymmetric Information written by Michael Christensen and published by . This book was released on 1987 with total page 20 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Lessons of Economic Stabilization and Its Aftermath written by Banḳ Yiśraʼel and published by MIT Press. This book was released on 1991 with total page 472 pages. Available in PDF, EPUB and Kindle. Book excerpt: Comprises essays presented at a conference held in Jerusalem in 1990.

Download or read book Trade Reform and Inflation Stabilization written by Mr.Vivek B. Arora and published by International Monetary Fund. This book was released on 1994-11-01 with total page 26 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper examines two important issues for a small high-inflation open economy with trade controls where the government implements an exchange-rate based stabilization program: first, the extent to which the degree of openness of the economy influences the probability of success of the program; and second, the conditions under which a trade reform, implemented in conjunction with the stabilization program, will increase the probability that stabilization will be successful. The paper shows that in an economy with high export and import price elasticities, structural reforms to increase openness can be important in determining the success of the program.

Download or read book Stabilization and Structural Adjustment in Poland written by Henryk Kierzkowski and published by Routledge. This book was released on 2013-04-15 with total page 336 pages. Available in PDF, EPUB and Kindle. Book excerpt: The Solidarity-led government which came into power in Poland in Autumn 1989 faced two enormous tasks. First, to stabilize an economy prone to hyperflation. Second, to replace a crumbling command system in favour of a market mechanism, in a country whose market institutions had been destroyed under forty years of communist rule. This book recounts the events of this period and the course taken by the new government, and analyzes the significance of this for the transition process in Poland and elsewhere.