The Mechanics of Devaluations and the Output Response in a DSGE Model: How Relevant is the Balance Sheet Effect?

Tovar, Camilo

doi:10.2139/ssrn.891763

Cited by 18 publications

(26 citation statements)

References 23 publications

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“…La especificación de la función de pérdida en el presente estudio permite, como en Tovar (2005), prever un continuo de regímenes cambiarios según el peso relativo asignado a la estabilización del tipo de cambio 5 . Los parámetros W s y W π miden el peso relativo asignado, respectivamente, a la variabilidad cambiaria y al índice de inflación.…”

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Las variaciones del tipo de cambio y el índice de inflación en las economías emergentes

García-Solanes

Torrejón-Flores

2016

Revista De La CEPAL

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Las variaciones del tipo de cambio y el índice de inflación en las economías emergentes José García-Solanes y Fernando Torrejón-Flores RESUMENSe propone un modelo de equilibrio general estructural para analizar las reacciones del tipo de cambio nominal y el nivel de precios internos ante tres tipos de shocks externos en economías emergentes con acceso limitado a los mercados mundiales de capital.Aunque los resultados dependen decisivamente del tipo de shock externo, los parámetros del balance nacional aquí examinados, la prima de riesgo y el índice de endeudamiento externo exacerban las reacciones de las dos variables endógenas, sin alterar el grado de traspaso del tipo de cambio. Además, las curvas de Phillips más planas, como las observadas actualmente en muchas economías, tienden a aumentar el traspaso del tipo de cambio. A partir de estos resultados se recomienda a las autoridades de las economías emergentes, que desean estabilizar los mercados y limitar el traspaso del tipo de cambio, minimizar los dos parámetros de riesgo mediante un régimen de metas de inflación flexible. PALABRAS CLAVETipos de cambio, precios, mercados de capital, modelos econométricos, macroeconomía, mercados emergentes CLASIFICACIÓN JEL E52, F21, F33

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Section: Modelo Teóricounclassified

“…Relación entre deuda externa de los capitalistas y valor neto del estado estacionario, medida en moneda nacional y términos nominales (Tovar, 2005).…”

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Las variaciones del tipo de cambio y el índice de inflación en las economías emergentes

García-Solanes

Torrejón-Flores

2016

Revista De La CEPAL

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“…We expand on the work of Céspedes, Chang andVelasco (2003 and, Fraga, Goldfajn and Minella (2003), and Tovar (2005).…”

Section: The Theoretical Modelmentioning

confidence: 99%

“…Our specification of the loss function allows us, as in Tovar (2005), to envisage a continuum of exchange-rate regimes depending on the relative weight assigned to exchange-rate stabilization. 5 The parameters w s and w π measure the relative weight accorded, respectively, to exchange-rate and inflationrate variability.…”

Section: The Theoretical Modelmentioning

confidence: 99%

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Exchange-rate variations and the rate of inflation in emerging economies

García-Solanes¹,

Torrejón-Flores²

2016

CEPAL Review

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This paper develops a structural general equilibrium model to analyse the reactions of the nominal exchange rate and the domestic price level to three types of external shock in emerging economies that have limited access to world capital markets. Although the results depend crucially on the type of external shock, each of the two national balance-sheet parameters considered here -the risk premium and the ratio of external indebtedness-exacerbates the reactions of the two endogenous variables without altering the degree of exchange-rate pass-through (erpt). Moreover, flatter Phillips curves, as observed today in many economies, tend to increase erpt. On the basis of these results, the authorities of emerging economies seeking to stabilize markets and limit erpt are advised to minimize the two risk parameters by applying a flexible inflation-targeting regime. KEYWORDSForeign exchange rates, prices, capital markets, econometric models, macroeconomics, emerging markets EXCHANGE-RATE VARIATIONS AND THE RATE OF INFLATION IN EMERGING ECONOMIES • JOSÉ GARCÍA-SOLANES AND FERNANDO TORREJÓN-FLORESThe literature on variations in exchange rates and prices in open economies has typically focused on exchangerate pass-through (erpt), that is, the extent to which exchange-rate fluctuations are transmitted to domestic prices. In order to assess the pure erpt effects the analysis should be restricted to the initial impacts on import prices or, at most, to the first stages affecting domestic producer prices. If the analysis is extended to capture the short-run clearing of assets and goods markets, the final ratio of domestic price variations to exchange-rate variations gives a more indirect measure of erpt. The relationships between exchange rates and domestic prices are sensitive to the type of external shocks that trigger adjustments, as emphasized by Mishkin (2008).Although it is generally held that low inflation rates, monetary policy credibility, and exchange-rate flexibility contribute to lower erpt, 1 some authors have obtained estimates that contradict or call into question that consensus. For example, Nogueira (2007) found that the adoption of an inflation-targeting regime -thus strengthening monetary policy credibility-increased erpt in the Czech Republic and the Republic of Korea; and Coricelli, Jazbec and Masten (2004) discovered that exchange-rate flexibility magnified the erpt coefficient in four advanced transition economies. In a similar vein, Byrne, Chavali and Kontonikas (2010), Sek and Kapsalyamova (2008), and Korhonen and Wachtel (2006) found that erpt effects are, in fact, very heterogeneous and asymmetrical among countries. According to Mishkin (2008), those divergent findings may be explained by the fact that authors did not take into account the type of external shocks that hit the economies.In this paper, we examine the erpt that occurs when exchange rates and domestic prices are adjusted in the short-run macroequilibrium. In order to address the (2006), Sek andKapsalyamova (2008), andTakatoshi a...

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An Estimated Stochastic General Equilibrium Model with Partial Dollarization: A Bayesian Approach

2012

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The Mechanics of Devaluations and the Output Response in a DSGE Model: How Relevant is the Balance Sheet Effect?

Cited by 18 publications

References 23 publications

Las variaciones del tipo de cambio y el índice de inflación en las economías emergentes

Las variaciones del tipo de cambio y el índice de inflación en las economías emergentes

Exchange-rate variations and the rate of inflation in emerging economies

An Estimated Stochastic General Equilibrium Model with Partial Dollarization: A Bayesian Approach

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