Business Finance in Less Developed Capital Markets

By Klaus P. Fischer; George J. Papaioannou | Go to book overview

government had to monetize a large fiscal deficit, the tablita would become unsustainable. This indeed happened in 1982. The policy of managing the exchange rate was implemented at a very high initial cost, and many of the benefits were lost when the policy was discontinued.


Appendix
Glossary of Variables and Data Sources
is the nominal interest rate in Uruguay, proxied by commercial banks' (average)
annualized lending rate on ordinary domestic currency loans with a maturity not
exceeding six months (Central Bank data bank).
is the dollar interest rate in Uruguay, proxied by commercial banks' (average)
lending rates on ordinary foreign currency loans with a maturity not exceeding
six months ( Central Bank data bank).
is the spread calculated as.
is the actual depreciation of the exchange rate as scheduled in the tablita. It
measures percentage changes in the exchange rate (expressed in pesos per U.S.
dollar, implicit/market rate, period average taken from the International Mone-
tary Fund [IMF], International Financial Statistics [IFS] line rf). Since is
calculated as (log et+12 - log et), ex ante and ex post are equal up to December
1981.
Δt is the currency-adjusted spread calculated as.
is the actual depreciation of the exchange rate when exchange parity is not
preannounced.
is the policy-risk component in economic agents' expectations of devaluation.
is the estimator of calculated from equation (18.9).
is the expected rate of devaluation. The rate can be proxied by when
exchange parity is not preannounced but should be proxied by
during the tablita period.
πt is the annualized rate of inflation calculated as (log WPIt - log WPIt-12).
Gt is the ratio of government deficit (IMF, IFS, line 80, multiplied by -1 so that a + indicates a deficit) as a ratio of GDP. Since there are no available monthly or quarterly data for GDP, it had to be interpolated from yearly figures (IMF, IFS, line 99b).
DLTRUt is the percentage changes (d log) in total reserves of Uruguay (total reserves minus gold plus gold at national valuation expressed in millions of Special Drawing Rights [SDRs]) taken from the IMF, Supplement on International Reserves, no. 6, 1983.
DLTRAt is defined as in DLTRUt for Argentina.

-346-

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