Journal Article Domestic Policies and Foreign Resource Requirements: Comment Get access Sebastian Edwards Sebastian Edwards University of California, Los Angeles Search for other works by this author on: Oxford Academic Google Scholar The Quarterly Journal of Economics, Volume 99, Issue 1, February 1984, Pages 201–206, https://doi.org/10.2307/1885728 Published: 01 February 1984

Recently a number of authors have criticized the role of devaluations in traditional stabilization programs.It has been argued that, contrary to the traditional view, devaluations are contractionary, and generate a decline in aggregate output.In spite of the renewed theoretical interest in the possible contractionary effects of devaluations, the empirical evidence on the subject has been quite sketchy.In this paper the Khan and Knight (1981) model is extended to empirically address the issue of contractionary devaluations.The extended model considers the effect of money surprises, fiscal factors, terms of trade changes and devaluations on the level of real output.The results obtained, using a variance components procedure on data for 12 developing countries, provide some support to the short-run contractionary devaluation hypothesis; the results obtained indicate that in the short run a devaluation will generate a decline in aggregate output.It is also found that after one year a devaluation will have an expansionary effect on output.The evidence suggests that in the long run, devaluations will have no effect on output.

Sebastian Edwards, The Demand for International Reserves and Monetary Equilibrium: Some Evidence From Developing Countries, The Review of Economics and Statistics, Vol. 66, No. 3 (Aug., 1984), pp. 495-500

During the last few years there has been an increasing interest in understanding the relationship between exchange-rate regimes and macroeconomic stability. Some recurrent policy questions are: (a) why do countries still choose fixed, nominal exchange-rate regimes 25 years after the abandonment of the Bretton Woods system? (b) do fixed exchange-rate regimes impose an effective constraint on monetary and fiscal behavior, thus lowering inflation rates over the long run? and (c) are exchangerate-based stabilization programs superior to money-based programs? This paper deals with the first question-the selection of the exchange-rate regime-from a politicaleconomy perspective. Why certain countries choose a particular type of exchange-rate regime is a highly relevant question. Why does Austria have a fixed exchange rate, for example, while the United Kingdom has a flexible one? Why has Argentina chosen a fixed exchange rate, while Chile has a flexible-cumbands system? More generally, in December 1992, why did 84 countries (out of the 167 reported in the IMF's International Financial Statistics) peg their currencies to a major currency or a currency composite? The theoretical discussion deals with the trade-off between credibility and flexibility, and it emphasizes the role of politics and institutions. In the empirical section I use a large cross-country panel data set to analyze the role of various factors, including political instability, in decid