Venegas-Martinez, Francisco; Ortiz-Ramírez, Ambrosio; … - In: EconoQuantum, Revista de Economia y Negocios 9 (2012) 1, pp. 35-55
This paper develops, in a small open economy of pure exchange framework, a stochastic model of exchange-rate-based inflation stabilization plan that is expected to be temporary. Agents have expectations of devaluation driven by a mixed diffusionjump process where the expected size of a possible...