European Business Schools Librarian's Group

Department of Economics Working Papers,
Vienna University of Economics and Business, Department of Economics

No 50: Exchange Rate-Based Stabilization: Pleasant Monetary Dynamics?

Gert Wehinger ()
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Gert Wehinger: Department of Economics, Vienna University of Economics & B.A. and Oesterreichische Nationalbank, Economic Studies Division, POB 61, A-1010 Vienna, Austria

Abstract: High inflation economies have ultimately been successful in stabilising their prices using the exchange rate as a nominal anchor. Besides stabilization, these recent examples have shown boom-recession cycles, contrary to what can be expected from (pure) money-based stabilizations. Various theoretical explanations of such boom-cycles are discussed and a model of aggregate supply and demand generating such an outcome is developed. There the boom dynamics depend mainly on a slump in real interest rates and wage flexibility.

Keywords: Macroeconomic modelling; exchange rate-based stabilization; high inflation; Latin America.

JEL-codes: E10; E31; E52; E63 August 1997

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