The inflationary impact of repetitive devaluation

It is suggested that in countries which have sustained a significant inflationary condition and, as a consequence, have frequently changed their foreign‐exchange rate, price expectations may be developed on the basis of these changes. In order to examine this hypothesis a macroeconomic model is built and econometric tests are undertaken using quarterly data for Brazil, Chile, and Uruguay. The author warns that since repetitive devaluation‐type policies can fuel price expectations, they may only lead to increased domestic inflationary pressures, balance of trade deficits, and further rounds of devaluation.     

Output effects of devaluation: Evidence from Asia

We study the effect of devaluation on output in six developing countries of Asia. In an empirical model that includes monetary, fiscal, and external variables, we examine the impact of devaluation as the effect of real exchange depreciation and alternatively as the effect of nominal devaluation and changes in the foreign‐to‐domestic price ratio. We find that with few exceptions a devaluation fails to make any effect on output over any length of time — short run, intermediate run or long run. Whatever effect on output we are able to uncover comes from the relative price level (the ratio of foreign to domestic prices) but not from nominal devaluation.     

Tariffs and economic development: A comment

The optimality criteria of linear programming transportation and spatial equilibrium models never ‘explain ‘ real world flow patterns. This paper provides reasons for the difference between an optimal solution and real world patterns. Data for the linear programming exercises are derived from the four stages of a rice marketing system in Sri Lanka at a time when the state had monopoly control over distribution. The examination of factors more important than transport costs in explaining residual flows sheds some light on policy and institutional problems associated with monopoly procurement.

Substantively, a comparison of the optimal solution with reality shows a fairly high degree of transportation efficiency throughout the system, except at the last stage, where rice changes hands between two parastatal orginisations (the Paddy Marketing Board and the Food Commission) to be distributed to final destinations. Inefficient store locations rather than commodity allocations generate the greatest waste of transport. Reasons for the difference between programming solutions and reality include uncertainty, congestion, policies and institutional structure conducive to a deterioration in quality of the commodity handled, problematic regional preferences for rice type, inadequate communications, unpredictable timing of rice imports and corruption.     

Commodity concentration and export fluctuations: A comment

The method of analysis used in a recent paper on trade diversification and export fluctuations is reviewed. The derivation of certain results is shown to be incorrect, and the validity of the suggested measure of predictability is questioned.