MARKET STRUCTURE AND CONTRACTIONARY DEVALUATION By

ii In practice, devaluation has been prescribed as a major policy instrument in many countries, on the presumption that devaluation is expansionary. However, whether devaluation is contractionary is a matter of considerably theoretical and practical importance. This thesis investigates whether and under what conditions devaluation is contractionary under a wide range of assumptions concerning market structures. The investigation is conducted at both micro and macro levels, and for both short-run and long-run time horizons. In general, contractionary deval uation is not an unusual phenomenon; instead, it can easily occur as long as the demand and supply structures in the market satisfy a condition which we derive and interpret