Working Paper: CEPR ID: DP3178
Authors: Ariel Thomas Burstein; Martin Eichenbaum; Sergio Rebelo
Abstract: This Paper studies the behaviour of inflation after nine large post-1990 contractionary devaluations. A salient feature of the data is that inflation is low relative to the rate of devaluation. We argue that distribution costs and substitution away from imports to lower quality local goods can account quantitatively for the post-devaluation behaviour of prices.
Keywords: Devaluation; Exchange Rates; Inflation
JEL Codes: F31
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| large devaluations (F31) | inflation rates (E31) |
| distribution costs (D39) | inflation rates (E31) |
| substitution effect from imports to lower quality local goods (L15) | inflation rates (E31) |
| large devaluations (F31) | price levels (E30) |