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Inflation target, real exchange rate and external crisis in a Kaleckian model

Author

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  • Gabriel Porcile
  • Alexandre Souza
  • Ricardo Viana

Abstract

Which role should the real exchange rate play in an inflation target regime? In this paper this point is discussed from the point of view of the conditions required for avoiding an external crisis. With this objective, a dynamic Kaleckian model is presented focusing on the stability of the external debt to capital ratio. The main conclusion is that policy makers should monitor closely the evolution of the real exchange rate in order to make compatible the inflation target regime with external stability. JEL Classification: F31; F34.

Suggested Citation

  • Gabriel Porcile & Alexandre Souza & Ricardo Viana, 2011. "Inflation target, real exchange rate and external crisis in a Kaleckian model," Brazilian Journal of Political Economy, Center of Political Economy, vol. 31(4), pages 579-593.
    • Handle: RePEc:ekm:repojs:v:31:y:2011:i:4:p:579-593:id:422
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    Keywords

    Kaleckian models; inflation target;

    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems

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