(DP 1991-08) The Effects of Devaluation: A Review of Theory

Abstract

This paper reviews the literature on the theory of devaluation. The various approaches to the analysis of devaluation that are discussed in the paper are complementary and represent different views of the same phenomenon. Thus, in analyzing the effects of devaluation, one must use a combination of several approaches. In addition, one must take into account the issues pertaining to the distributional effects, the pessimistic consequences, and the effectiveness of devaluation.