Moreno-Lopez, Paul; de la Croix, David - Institut de Recherche Économique et Sociale (IRES), … - 1994
An exchange rate devaluation oriented to correct internal and external imbalances is considered in a tradeable/non-tradeable model where the domestic prices are rigid downwards and wages are set by unions. First, the policy is ineffective as long as there is an efficiency disjunction, i.e., the...