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Exchange rate devaluation, monetary policy and wages:A general equilibrium analysis for Chile

Authors
Journal
Economic Modelling
0264-9993
Publisher
Elsevier
Publication Date
Volume
2
Issue
1
Identifiers
DOI: 10.1016/0264-9993(85)90005-7
Keywords
  • Devaluation
  • General Equilibrium Model
  • Chile
Disciplines
  • Economics

Abstract

Abstract A range of devaluation, monetary and wage policy mixes are analysed for the Chilean economy using a 10 sector comparative static model built along neoclassical lines. The model, while focusing on the real side of the economy, also contains a simple monetary sector. Quantifying the short-run implications of each policy mix for key macroeconomic and sectoral variables enables judgements to be made about the effectiveness of each mix in reaching specified targets and their feasibility. Money wage flexibility downwards is crucial if balance of trade and employment targets are to be achieved with lower domestic inflation and a smaller nominal devaluation.

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