Guzman, Juan Pablo Medina; Lama, Ruy - International Monetary Fund (IMF) - 2010
This paper evaluates how successful is a policy of exchange rate stabilization to counteract the negative effects of a …-by-doing externality in the tradable sector. The paper shows that leaning against an appreciated exchange rate can prevent an inefficient … paper also finds that welfare is a decreasing function of exchange rate intervention. These results suggest that stabilizing …