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Políticas de Demanda, Choques Externos y Regímenes de Tipo de Cambio: un Análisis Formal

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  • Liquitaya Briceño, José

    ()
    (UAM)

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    Abstract

    This paper examines the effects of the demand management policies and external shocks on the trade balance and real income in a small open economy. In addition to the Marshall-Lerner condition, it analyzes the conditions that must be met in so far that a currency devaluation may improve the trade balance and output in the short term. We show that under flexible exchange rates, monetary policy is an effective tool to induce the growth of output, but not the fiscal policy. On the other hand, under fixed exchange rates, fiscal policy becomes a powerful tool and monetary policy is ineffective. Then it makes a statement of the conditions to be observed so that a devaluation lead up to a trade balance and output improvement. Finally, we examine some theoretical limitations of the model not corresponding with actual facts.

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    Bibliographic Info

    Article provided by Universidad Michoacana de San Nicolás de Hidalgo, Instituto de Investigaciones Económicas y Empresariales in its journal Revista Nicolaita de Estudios Económicos.

    Volume (Year): VI (2011)
    Issue (Month): 2 ()
    Pages: 7-34

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    Handle: RePEc:ris:rnicee:0061

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    Related research

    Keywords: Mundell-Fleming model; IS-LM model; fiscal; monetary and trade policy;

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