Devaluation and pass-through in indebted and risky economies
This paper develops a structural general equilibrium model to analyse the pass-through from devaluation to producer and consumer prices in Emerging Market Economies (EMEs). Simulation analysis shows that balance-sheet effects created by capital market imperfections and the home bias shrink the impact of devaluation on both types of internal prices. This finding helps explain why pass-through to internal prices is low in EMEs. It also shows that, for benchmark values of the parameters, devaluation remains a good device to modify the real exchange rate and to mitigate the negative impact of external shocks in EMEs.
Year of publication: |
2010
|
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Authors: | García-Solanes, José ; Torrejón-Flores, Fernando |
Published in: |
International Review of Economics & Finance. - Elsevier, ISSN 1059-0560. - Vol. 19.2010, 1, p. 36-45
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Publisher: |
Elsevier |
Subject: | Devaluation Pass-through Emerging market economies |
Saved in:
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