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GTAP Resources: Resource Display

GTAP Resource #1943

"Macroeconomic and Distributional Effects of Devaluation in a Dollarized Economy: A CGE Analysis for Bolivia "
by Wiebelt, Manfred, Rainer Schweickert and Rainer Thiele


Abstract
A real-financial CGE model is employed to simulate the macroeconomic and distributional effects of exchange rate policy in the highly dollarized Bolivian economy. Overall, dollarization appears to matter more through real than through financial-sector effects. The main macroeconomic result is that the potential of devaluation to smooth the adjustment path after a negative shock primarily depends on the absence of wage indexation. Only if nominal wages are constant in the short run, devaluation reduces unemployment and cushions the reduction of real GDP induced by the shock. Financial de-dollarization tends to be contractionary but different degrees of financial dollarization hardly change the real sector effects. As concerns distributional effects, devaluation in no circumstance reduces the poverty effect of the external shock. Even the significant short-run macroeconomic expansion that occurs without wage indexation does not translate into significant poverty alleviation.


Resource Details (Export Citation) GTAP Keywords
Category: 2006 Conference Paper
Status: Published
By/In: Presented at the 9th Annual Conference on Global Economic Analysis, Addis Ababa, Ethiopia
Date:
Version:
Created: Wiebelt, M. (4/10/2006)
Updated: Wiebelt, M. (4/10/2006)
Visits: 2,036
No keywords have been specified.


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