ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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Cooper s Contractionary Devaluation Hypothesis-A Note

A Note Pronab Sen In recent years a number of studies have questioned the orthodox proposition that a devaluation is always expansionary. The implication of a non-expansionarydevaluation is that in such cases not only are complementary contractionary monetary and fiscal policies unnecessary for making the devaluation 'stick', they may actually prove to be undesirable in the sense that investments even in the traded goods sector may get retarded and thus delay the process of moving to a new and more export- oriented economic structure. Unfortunately, these studies have had virtually no effect on the 'conditionalities' imposed by the Fund-Bank establishment and contractionary policies continue to he routinely prescribed along with somewhat less controversial 'exchange rate adjustments'.

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