A model of currency depreciation and the debt-inflation spiral
AbstractThis paper shows how a government that cannot make credible policy commitments might manage its exchange rate and fiscal stance in a world of rational expectations. The dynamic-game model developed here potentially can generate diverse patterns of macroeconomic behaviour, patterns that differ as a result of assumed differences in government objectives. Under some types of government, the ongoing strategic interaction between the public and private sectors leads to a disinflationary outcome. Other governments may push the economy into a spiral of rising debt and inflation.
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Bibliographic InfoArticle provided by Elsevier in its journal Journal of Economic Dynamics and Control.
Volume (Year): 15 (1991)
Issue (Month): 1 ()
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Other versions of this item:
- Obstfeld, Maurice, 1990. "A Model of Currency Depreciation and the Debt-Inflation Spiral," CEPR Discussion Papers 431, C.E.P.R. Discussion Papers.
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