ABSTRACT
It should be clear by now, as demonstrated in the last chapter, that exchange-rate adjustment plays a significant role in orthodox stabilization policies. From this point, the study will address itself toward exploring devaluation-induced results that run opposite to the standard corollaries that neo-classical theory implies. In other words, the model which was presented in the first chapter is aimed at demonstrating that an increase in domestic output which should result from more efficient resource allocation (in the direction of production of exportables and import-substituting goods) is not likely to occur when some vital, structural features of semi-industrialized economies are incorporated into the analysis and, fundamentally, when the significant income effects are taken into consideration. By the latter, what is implied is the recognition that devaluation alters the income shares of social groups and thus directly affects aggregate demand.
