IDEAS home Printed from https://ideas.repec.org/a/kap/openec/v5y1994i2p159-175.html
   My bibliography  Save this article

Devaluation and monetary policy with import compression

Author

Listed:
  • Jørn Rattsø

Abstract

The consequences of exchange rate and monetary policies are investigated under two foreign exchange regimes. The analysis is motivated by the experiences in sub-Saharan Africa. The supply side of the open economy model developed by Buffle (1986) is modified to take into account the import dependency of the region. In the first regime, with endogenous foreign savings, overvalued exchange rate and expansionary monetary policy tend to increase the current account deficit. In the second regime, when intermediate imports are rationed to handle the foreign exchange shortage, overvaluation and monetary expansion are shown to be likely sources of output contraction. The cost of policy reorientation is reduced investment. Copyright Kluwer Academic Publishers 1994

Suggested Citation

  • Jørn Rattsø, 1994. "Devaluation and monetary policy with import compression," Open Economies Review, Springer, vol. 5(2), pages 159-175, March.
    • Handle: RePEc:kap:openec:v:5:y:1994:i:2:p:159-175
    DOI: 10.1007/BF01000485
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1007/BF01000485
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1007/BF01000485?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Chenery, Hollis B., 1984. "Economic Structure and Performance," Elsevier Monographs, Elsevier, edition 1, number 9780126800609 edited by Syrquin, Moshe & Taylor, Lance & Westphal, Larry E..
    2. Krugman, Paul & Taylor, Lance, 1978. "Contractionary effects of devaluation," Journal of International Economics, Elsevier, vol. 8(3), pages 445-456, August.
    3. Buffie, Edward F., 1986. "Devaluation, investment and growth in LDCs," Journal of Development Economics, Elsevier, vol. 20(2), pages 361-379, March.
    4. Wheeler, David, 1984. "Sources of stagnation in sub-Saharan Africa," World Development, Elsevier, vol. 12(1), pages 1-23, January.
    5. J. Saul Lizondo & Peter J. Montiel, 1989. "Contractionary Devaluation in Developing Countries: An Analytical Overview," IMF Staff Papers, Palgrave Macmillan, vol. 36(1), pages 182-227, March.
    6. Steve Kayizzi‐Mugerwa, 1990. "Growth From Own Resources: Zambia's Fourth National Development Plan in Perspective," Development Policy Review, Overseas Development Institute, vol. 8(1), pages 59-76, March.
    7. Edmar Bacha, 1982. "Growth with limited supplies of foreign exchanges: a reappraisal of the two-gap model," Textos para discussão 26, Department of Economics PUC-Rio (Brazil).
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Davies, Rob & Rattso, Jorn & Torvik, Ragnar, 1998. "Short-Run Consequences of Trade Liberalization: A Computable General Equilibrium Model of Zimbabwe," Journal of Policy Modeling, Elsevier, vol. 20(3), pages 305-333, June.
    2. Rattso, Jorn & Torvik, Ragnar, 1998. "Economic openness, trade restrictions and external shocks: modelling short run effects in Sub-Saharan Africa," Economic Modelling, Elsevier, vol. 15(2), pages 257-286, April.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. A. E. Akinlo & A. F. Odusola, 2003. "Assessing the impact of Nigeria's naira depreciation on output and inflation," Applied Economics, Taylor & Francis Journals, vol. 35(6), pages 691-703.
    2. Serven, Luis, 1990. "Anticipated real exchange-rate changes and the dynamics of investment," Policy Research Working Paper Series 562, The World Bank.
    3. Antonia López Villavicencio & Josep Lluís Raymond Bara, 2006. "The short and long-run determinants of the real exchange rate in Mexico," Working Papers wpdea0606, Department of Applied Economics at Universitat Autonoma of Barcelona.
    4. An, Lian & Kim, Gil & Ren, Xiaomei, 2014. "Is devaluation expansionary or contractionary: Evidence based on vector autoregression with sign restrictions," Journal of Asian Economics, Elsevier, vol. 34(C), pages 27-41.
    5. Ricardo Bebczuk & Arturo Galindo & Ugo Panizza, 2010. "An Evaluation of the Contractionary Devaluation Hypothesis," Palgrave Macmillan Books, in: Hadi Salehi Esfahani & Giovanni Facchini & Geoffrey J. D. Hewings (ed.), Economic Development in Latin America, chapter 8, pages 102-117, Palgrave Macmillan.
    6. Eddy Bekkers & Joseph Francois, 2014. "Bilateral Exchange Rates and Jobs," Review of International Economics, Wiley Blackwell, vol. 22(2), pages 275-298, May.
    7. Gonzalo Hernández, 2011. "Terms of Trade and Output Fluctuations in Colombia," UMASS Amherst Economics Working Papers 2011-04, University of Massachusetts Amherst, Department of Economics.
    8. R Mabugu, 2001. "Macroeconomic Effects Of A Devaluation In Zimbabwe A Cge Analysis," South African Journal of Economics, Economic Society of South Africa, vol. 69(4), pages 708-733, December.
    9. Lanteri, Luis N., 2001. "Choques externos y reasignación sectorial de recursos. Evidencia para la economía argentina," El Trimestre Económico, Fondo de Cultura Económica, vol. 0(271), pages 369-403, julio-sep.
    10. Shaghil Ahmed & Iffat Ara & Kalim Hyder, 2006. "How External Shocks and Exchange Rate Depreciations Affect Pakistan? Implications for Choice of an Exchange Rate Regime," SBP Research Bulletin, State Bank of Pakistan, Research Department, vol. 2, pages 61-68.
    11. Arabinda Basistha & Sheida Teimouri, 2015. "Currency Crises and Output Dynamics," Open Economies Review, Springer, vol. 26(1), pages 139-153, February.
    12. Shi, Jianhuai, 2007. "Are Currency Appreciations Contractionary in China?," 2007: China's Agricultural Trade: Issues and Prospects Symposium, July 2007, Beijing, China 55020, International Agricultural Trade Research Consortium.
    13. Elson, Diane, 1995. "Gender Awareness in Modeling Structural Adjustment," World Development, Elsevier, vol. 23(11), pages 1851-1868, November.
    14. Köhler, Karsten, 2016. "Currency devaluations, aggregate demand, and debt dynamics in an economy with foreign currency liabilities," IPE Working Papers 78/2016, Berlin School of Economics and Law, Institute for International Political Economy (IPE).
    15. Pablo Mejia-Reyes & Denise Osborn & Marianne Sensier, 2010. "Modelling real exchange rate effects on output performance in Latin America," Applied Economics, Taylor & Francis Journals, vol. 42(19), pages 2491-2503.
    16. Kim, Yoonbai & Ying, Yung-Hsiang, 2007. "An empirical assessment of currency devaluation in East Asian countries," Journal of International Money and Finance, Elsevier, vol. 26(2), pages 265-283, March.
    17. Yeldan, A. Erinc, 1997. "Financial liberalization and fiscal repression in Turkey: Policy analysis in a CGE model with financial markets," Journal of Policy Modeling, Elsevier, vol. 19(1), pages 79-117, February.
    18. Akiko Suwa-Eisenmann & François Bourguignon & Jaime de Melo, 1995. "Dévaluation et compétitivité en Côte-d'Ivoire," Revue Économique, Programme National Persée, vol. 46(3), pages 739-749.
    19. Taye, Haile Kebret, 1999. "The Impact of Devaluation on Macroeconomic Performance: The Case of Ethiopia," Journal of Policy Modeling, Elsevier, vol. 21(4), pages 481-496, July.
    20. Steven B. Kamin & Marc Klau, 1997. "Some multi-country evidence on the effects of real exchange rates on output," BIS Working Papers 48, Bank for International Settlements.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:kap:openec:v:5:y:1994:i:2:p:159-175. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.