Abstract
We study the effect of devaluation on output in six developing countries of Asia. In an empirical model that includes monetary, fiscal, and external variables, we examine the impact of devaluation as the effect of real exchange depreciation and alternatively as the effect of nominal devaluation and changes in the foreign‐to‐domestic price ratio. We find that with few exceptions a devaluation fails to make any effect on output over any length of time — short run, intermediate run or long run. Whatever effect on output we are able to uncover comes from the relative price level (the ratio of foreign to domestic prices) but not from nominal devaluation.
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