Stabilization, credibility and regime dependent real exchange rates

Peter Prazmowski

Research output: Working paperDiscussion paper

Abstract

This paper studies a dynamic error correction model (ECM) highlighting the consequences of regime changes and of credibility on the performance of real exchange rates during stabilization. The analysis shows that the structural parameters of the ECM, from which an equilibrium real exchange rate is calculated, will be subject to structural breaks reflecting regime and credibility changes. Empirical evidence is presented on the Mexican 1988 and 1995 stabilization episodes.
Original languageEnglish
Place of PublicationKingston upon Thames, U.K.
PublisherFaculty of Arts and Social Sciences, Kingston University
Number of pages36
Publication statusPublished - Mar 2006
Externally publishedYes

Publication series

NameEconomics Discussion Paper
PublisherFaculty of Arts and Social Sciences, Kingston University

Keywords

  • ECM
  • Economics and econometrics
  • Mexico
  • equilibrium real exchange rates
  • inflation

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