Exchange-Rate-Based Stabilization in Argentina and Chile

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Exchange-Rate-Based Stabilization in Argentina and Chile

Kiguel & Liviatan, 1994.

An exchange rate based stabilization is one designed to reduce inflation by using the exchange rate as the main nominal anchor. This does not mean necessarily a fixed exchange rate. A crawling peg with a low rate of depreciation or a preannounced gradual reduction in the rate of devaluation are alternative ways of using the exchange rate as a nominal anchor.