Real Exchange Rate Targets, Nominal Exchange Rate Policies, and Inflation

• J. Saul Lizondo ^[1]
  1. [1] International Monetary Fund
• Localización: Revista de análisis económico, ISSN-e 0718-8870, ISSN 0716-5927, Vol. 6, Nº 1, 1991, págs. 5-21
• Idioma: inglés
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• Resumen

  • Thh paper examines the implications of some nominal exchange rate policies aimed or attaining a given real exchange rate target. A policy rule that sets the rate of nominal depreciation as a function of the departures of the real exchange rate from its target level is unable to achieve the target. In contrast, a policv rule that sets the change in the rate of depreciation as a function of those departures may lead the economy to the target, under certain conditions. However, this policy could also lead the economy to a process of accelerating inflation.