The Aftermath of Appreciations

This paper empirically analyzes a broad range of real exchange rate appreciation episodes. The objective is twofold. First, the paper studies the dynamics of appreciations, using a sample that is not limited to cases that end in crisis (or devaluation). Second, the paper analyzes the mechanism by wh...

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Bibliographic Details
Published in:The Quarterly journal of economics 1999-02, Vol.114 (1), p.229-262
Main Authors: Goldfajn, Ilan, Valdés, Rodrigo O.
Format: Article
Language:English
Subjects:
Appreciation
Currency
Currency devaluation
Depreciation
Economic theory
Economics
Estimation methods
Exchange rates
Foreign exchange
Foreign exchange rates
Inflation rates
Interest rates
International aspects
Manycountries
Money
Nominal exchange rates
Overvalued currency
Prices and rates
Real exchange rates
Statistical analysis
Studies
Trade
Value (Economics)
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Summary:This paper empirically analyzes a broad range of real exchange rate appreciation episodes. The objective is twofold. First, the paper studies the dynamics of appreciations, using a sample that is not limited to cases that end in crisis (or devaluation). Second, the paper analyzes the mechanism by which overvaluations are corrected. In particular, for various degrees of misalignment we calculate the proportion of the reversions that occur through nominal devaluations rather than through cumulative inflation differentials. The overall conclusion is that in most cases large and medium appreciations are reversed with nominal devaluations.
ISSN:0033-5533
1531-4650
DOI:10.1162/003355399555990