MACROECONOMIC EFFECTS OF ANTICIPATED DEVALUATIONS WITH INFORMAL FINANCIAL-MARKETS

The paper analyzes the macroeconomic effects of devaluation in a gener al equilibrium model of a developing country in which controls on inte rest rates and foreign exchange restrictions lead to the emergence of informal financial markets. The complexity of the model precludes an a nalytical treatment. A simulation approach, based on parameters derive d from estimates in the existing literature, is used to explore how th e existence of informal financial markets causes the effects of an off icial devaluation to be felt before the devaluation itself occurs.