The relative importance of different mechanisms through which devaluations affect output are analyzed using a dynamic stochastic general equilibrium model for a small open economy with imperfect competition and nominal rigidities. Devaluations are defined as an increase in the central bank's...

The link between exchange rates and interest rates features prominently in the theoretical and empirical literature on small open economies. This paper revisits this relationship using a simple model that incorporates the role of exchange rate pass-through into domestic prices and distinguishes...

The high-frequency analysis of foreign exchange dynamics is helpful in order to better identify the impact of central bank interventions. Evidence robustly shows that interventions do indeed move the exchange rate level in the desired direction. Interventions increase volatility in the short run...