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Real Exchange Rate Targeting Under Imperfect Asset Substitutability
Author:
Mr. José Saúl Lizondo
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Series:
IMF Working Papers
Volume/Issue:
Volume 1993: Issue 038
Language:
English
Publication Date:
01 Apr 1993
DOI:
https://doi.org/10.5089/9781451845624.001
ISBN:
9781451845624
ISSN:
1018-5941
Pages:
30
Keywords:
WP; rate of inflation; private sector demand; traded goods; central bank
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IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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This paper presents a model of an economy that uses nominal exchange rate policy to keep the real exchange rate constant at a certain target level, under imperfect asset substitutability. The paper discusses the determinants of inflation under such a policy, and examines the consequences of exogenous and policy-induced shocks on inflation, the external accounts, and the fiscal accounts. The shocks considered include changes in the real exchange rate target, changes in fiscal policy, changes in foreign interest rates, and open market sales of public sector domestic bonds.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund