Produktion, Abwertung und realer Wechselkurs in EntwicklungslAndern. — Der Verfasser untersucht, ob — wie neuerdings von den ⋯neuen Strukturalisten” behauptet wird — Abwertungen in EntwicklungslAndern kontraktive Wirkungen haben. Nach einem kurzen uberblick uber die Literatur werden Daten fur 23 EntwicklungslAnder aus den Jahren 1978 bis 1987 benutzt, um ein Modell zu schAtzen, das die Entwicklung der realen Produktion explizit aus einem Gleichgewichtssystem von aggregierten Nachfrage- und Angebotsgro\en bei rationalen Erwartungen ableitet. Es ergibt sich, da\ antizipierte Abwertungen des realen Wechselkurses eine negative Auswirkung auf die Produktion haben, wAhrend Abwertungen, die nicht antizipiert werden, positiv wirken. Au\erdem zeigt sich, da\ die kontraktiven Effekte noch nach einem Jahr andauern, was der Ansicht widerspricht, Abwertungen seien auf ⋯mittlere” Sicht neutral. Output, devaluation et taux de change reel dans les pays en voie de developpement. — Cette etude evalue si les devaluations dans les pays en voie de developpement ont un effet de contraction comme les Nouveaux Structuralistes l’ont recemment souligne. Apres avoir brievement examine la litterature, l’auteur se sert de donnees relatives a 23 pays en voie de developpement pour la periode 1978 a 1987 afin d’estimer un modele de la production reelle. Ce modele est explicitement derive d’un systeme d’equilibre de l’offre et de la demande globales avec anticipations rationnelles. Les resultats indiquent que des depreciations anticipees du taux de change reel ont un effet negatif sur l’activite, tandis que des devaluations non-anticipees ont un effet positif. En outre, il est montre que l’effet de contraction persiste plus qu’une annee ce qui contredit l’hypothese que les devaluations sont neutres a moyen terme. Produccion, devaluacion y tasa de cambio real en los paises en desarrollo. — En esta trabajo se evalUa si, como los “Nuevos Estructuralistas” han enfatizado recientemente, las devaluaciones en los paises en desarrollo son contractivas. Despues de pasar revista a la literatura existente, se utilizan datos de 23 paises en desarrollo para 1978–1987 para estimar un modelo de comportamiento de la produccion real, explicitamente derivado de un modelo de equilibrio general de oferta y demanda con expectativas racionales. Los resultados indican que devaluaciones anticipadas de la tasa de cambio real tienen un impacto negativo sobre la produccion, mientras que cambios no anticipados tienen un efecto positive Ademas, se demuestra que el efecto contractivo persiste despues de un ano, contradiciendo asi la opinion que las devaluaciones son neutrales en el mediano plazo.

Output, devaluation and the real exchange rate in developing countries

This paper uses historical data from the Bretton Woods era to analyze the effectiveness of devaluation-based adjustment programs in the developing countries. Forty eight major devaluations undertaken between 1954 and 1971 are investigated in detail in an effort to understand the circumstances leading to these adjustment programs, as well as their degree of effectiveness. An important aspect of the analysis is the distinction between devaluations undertaken within the context of IMF programs, and devaluations implemented independently. We find out that, in general, countries with lower income per capita and deeper economic problems tended to seek IMF support with greater frequency. Also, our analysis indicates that countries with left-wing leaning governments were less likely to embark on IMF programs. With respect to the effectiveness of these devaluation programs, our findings support the notion that devaluations accompanied by restrictive and consistent macroeconomic policies are an efficient and powerful adjustment tool. Our historical investigation also shows that, in general, countries that embarked on IMF stand-by programs tended to perform better than countries that adjusted on their own.

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Devaluation Controversies in the Developing Countries: Lessons from the Bretton Woods Era

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The international monetary fund and the developing countries: A critical evaluation

This paper examines the effects of exchange rate fluctuations on real output growth and price inflation in a sample of twenty-two developing countries. The analysis introduces a theoretical rational expectation model that decomposes movements in the exchange rate into anticipated and unanticipated components. The model demonstrates the effects of demand and supply channels on the output and price responses to changes in the exchange rate. In general, exchange rate depreciation, both anticipated and unanticipated, decreases real output growth and increases price inflation. The evidence confirms concerns about the negative effects of currency depreciation on economic performance in developing countries.

Exchange rate fluctuations and economic activity in developing countries: theory and evidence

Chapter 28 Disequilibrium and structural adjustment

The exchange rate is a controversial instrument of economic policy, especially in developing countries. Even in cases where currency overvaluation is clearly a major cause of an acute balance of payments crisis, the governments of developing countries are frequently reluctant to devalue, apparently for three main reasons: (a) they doubt that export production, import demand, and domestic expenditures are very responsive to a change in the exchange rate ("elasticity pessimism"); (b) they fear the potentially disruptive side effects of devaluation on inflation, employment, and output growth as well as on real wages and income distribution; and (c) they want to avoid political risk.' The focus of the present study is on the effects of devaluation in the deficit-prone least developed countries where a large part of the population barely survives on a subsistence wage. To be wholly successful, devaluation generally requires a reduction of real wages to encourage the expansion of exports and of import substitution without a contraction of national income. Hence our lead question: Is devaluation an appropriate method of economic stabilization in the least developed countries where a decrease of real wages or earnings could result in severe economic hardship or even starvation? More specifically, the aim of our study is twofold: (1) to investigate the short-to-medium-term effects of devaluation on macroeconomic performance in the least developed countries, subject to the condition that real wages or earnings

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Marian Radetzki

Papers

Does Devaluation Make Sense in the Least Developed Countries