Economics, Econometrics and Finance
4 years ago

Real devaluation in Mexico leads to economic contraction and high inflation.

SSRN Electronic Journal
Output and the Real Exchange Rate in Developing Countries: An Application to Mexico
Steven B. Kamin, John H. Rogers

Paper Summary

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The study looked at how changes in the value of Mexico's currency affect the country's economy. They found that when the currency is devalued, it can lead to high inflation and economic contraction. This means that trying to keep the currency's value low to boost exports and output growth may not always work as intended.