Large devaluations and the real exchange rate

Ariel Burstein*, Martin Eichenbaum, Sergio Rebelo

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

177 Scopus citations


In this paper we argue that the primary force behind the large drop in real exchange rates that occurs after large devaluations is the slow adjustment in the prices of nontradable goods and services. Our empirical analysis uses data from five large devaluation episodes: Argentina (2002), Brazil (1999), Korea (1997), Mexico (1994), and Thailand (1997). We conduct a detailed analysis of the Argentinian case using disaggregated consumer price index data, data from our own survey of prices in Buenos Aires, and scanner data from supermarkets. We assess the robustness of our findings by studying large real exchange rate appreciations, medium devaluations, and small exchange rate movements.

Original languageEnglish (US)
Pages (from-to)742-784
Number of pages43
JournalJournal of Political Economy
Issue number4
StatePublished - Aug 2005

ASJC Scopus subject areas

  • Economics and Econometrics


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