Sticky Inflation and the Real Effects of Exchange Rate Based Stabilization:
Exchange rate-based inflation stabilization (ERBS) policies are associated with a boom-recession cycle in economic activity and sustained real exchange rate appreciation. A class of models in the literature has explained these empirical regularities with the lack of credibility of the stabilization...
Gespeichert in:
| 1. Verfasser: | |
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| Format: | Elektronisch E-Book |
| Sprache: | English |
| Veröffentlicht: |
Washington, D.C
International Monetary Fund
2003
|
| Schriftenreihe: | IMF Working Papers
Working Paper No. 03/151 |
| Online-Zugang: | UBW01 UEI01 LCO01 SBR01 UER01 SBG01 UBG01 FAN01 UBT01 FKE01 UBY01 UBA01 FLA01 UBM01 UPA01 UBR01 FHA01 FNU01 BSB01 TUM01 Volltext |
| Zusammenfassung: | Exchange rate-based inflation stabilization (ERBS) policies are associated with a boom-recession cycle in economic activity and sustained real exchange rate appreciation. A class of models in the literature has explained these empirical regularities with the lack of credibility of the stabilization plans. The lack-of-credibility models typically assume perfectly forward-looking pricing behavior without inflation stickiness and attribute the slow decline in inflation to the consumption boom that occurs due to the perceived temporariness of the ERBS policy. This paper tests the empirical validity of forward-looking pricing behavior in Mexico and Turkey, two countries which have experienced ERBS. It finds that the forward- and backward-looking components of inflation weigh approximately equally in pricing behavior, and therefore, that inflation is partially sticky. The paper then develops the theoretical implications of partial inflation stickiness in a lack of credibility model of ERBS and concludes that the presence of stickiness significantly reduces the persistence of the consumption boom predicted by the model, but helps to explain the recession in the late phase of the stabilization |
| Beschreibung: | 1 Online-Ressource (34 p) |
| ISBN: | 1451857055 9781451857054 |
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| index_date | 2024-07-03T20:13:29Z |
| indexdate | 2024-07-10T09:35:38Z |
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| record_format | marc |
| series2 | IMF Working Papers |
| spelling | Celasun, Oya Verfasser aut Sticky Inflation and the Real Effects of Exchange Rate Based Stabilization Celasun, Oya Washington, D.C International Monetary Fund 2003 1 Online-Ressource (34 p) txt rdacontent c rdamedia cr rdacarrier IMF Working Papers Working Paper No. 03/151 Exchange rate-based inflation stabilization (ERBS) policies are associated with a boom-recession cycle in economic activity and sustained real exchange rate appreciation. A class of models in the literature has explained these empirical regularities with the lack of credibility of the stabilization plans. The lack-of-credibility models typically assume perfectly forward-looking pricing behavior without inflation stickiness and attribute the slow decline in inflation to the consumption boom that occurs due to the perceived temporariness of the ERBS policy. This paper tests the empirical validity of forward-looking pricing behavior in Mexico and Turkey, two countries which have experienced ERBS. It finds that the forward- and backward-looking components of inflation weigh approximately equally in pricing behavior, and therefore, that inflation is partially sticky. The paper then develops the theoretical implications of partial inflation stickiness in a lack of credibility model of ERBS and concludes that the presence of stickiness significantly reduces the persistence of the consumption boom predicted by the model, but helps to explain the recession in the late phase of the stabilization Online-Ausg http://elibrary.imf.org/view/IMF001/06506-9781451857054/06506-9781451857054/06506-9781451857054.xml Verlag URL des Erstveröffentlichers Volltext |
| spellingShingle | Celasun, Oya Sticky Inflation and the Real Effects of Exchange Rate Based Stabilization |
| title | Sticky Inflation and the Real Effects of Exchange Rate Based Stabilization |
| title_auth | Sticky Inflation and the Real Effects of Exchange Rate Based Stabilization |
| title_exact_search | Sticky Inflation and the Real Effects of Exchange Rate Based Stabilization |
| title_exact_search_txtP | Sticky Inflation and the Real Effects of Exchange Rate Based Stabilization |
| title_full | Sticky Inflation and the Real Effects of Exchange Rate Based Stabilization Celasun, Oya |
| title_fullStr | Sticky Inflation and the Real Effects of Exchange Rate Based Stabilization Celasun, Oya |
| title_full_unstemmed | Sticky Inflation and the Real Effects of Exchange Rate Based Stabilization Celasun, Oya |
| title_short | Sticky Inflation and the Real Effects of Exchange Rate Based Stabilization |
| title_sort | sticky inflation and the real effects of exchange rate based stabilization |
| url | http://elibrary.imf.org/view/IMF001/06506-9781451857054/06506-9781451857054/06506-9781451857054.xml |
| work_keys_str_mv | AT celasunoya stickyinflationandtherealeffectsofexchangeratebasedstabilization |