The aftermath of appreciations

This paper empirically analyzes a broad range of real exchange rate appreci ation episodes. The objective is twofold. First, the paper studies the dyna mics of appreciations, using a sample that is not Limited to cases that end in crisis (or devaluation). Second, the paper analyzes the mechanism by wh ich overvaluations are corrected. In particular, for various degrees of mis alignment we calculate the proportion of the reversions that occur through nominal devaluations rather than through cumulative inflation differentials . The overall conclusion is that in most cases large and medium appreciatio ns are reversed with nominal devaluations.