The Distributional Consequences of Real Exchange Rate Adjustment

June 1, 2003

Preview Citation

Format: Chicago

Vladimir Klyuev. The Distributional Consequences of Real Exchange Rate Adjustment, (USA: International Monetary Fund, 2003) accessed November 21, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

The paper focuses on distributional consequences of macroeconomic adjustment. The preferences of economic agents over the level of the real exchange rate derived from standard models are monotonic, with agents favoring either an infinitely appreciated or depreciated rate. To generate less extreme preferences, a model is presented where appreciation would depress economic activity, while a large depreciation would hit the tradable sector by limiting the availability of labor, offsetting the favorable price effect. The model is in the spirit of the dependent economy model, but built on explicit microfoundations. The results can be used to analyze political economy aspects of macroeconomic adjustment.

Subject: Income, Labor, Political economy, Real exchange rates, Wages

Keywords: Aggregate demand, Present discounted value, WP

Publication Details

Pages:

35
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2003/133
Stock No:

WPIEA1332003
ISBN:

9781451855517
ISSN:

1018-5941

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