External debt sustainability under different policy rules
AbstractThe paper develops a Kaleckian macroeconomic model which discusses the conditions that may lead to an external debt crisis in a small developing economy fully integrated to global goods and financial markets. The focus is on how policy rules affect the stability of the economy. Two kinds of policy rules are discussed, namely an inflation rate target and a real exchange rate target, implemented through an interest rate operation procedure (IROP). It is argued that in both cases the evolution of the real exchange rate should be closely monitored to avoid external instability.
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Bibliographic InfoPaper provided by Universidade Federal do Paraná, Department of Economics in its series Working Papers with number 0105.
Length: 22 pages
Date of creation: 2010
Date of revision:
Note: Creation Date corresponds to the year in which the paper was published on the Department of Economics website. The paper may have been written a small number of months before its publication date.
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central banks; open economy; external crisis;
Find related papers by JEL classification:
- E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian
- E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
- F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-08-06 (All new papers)
- NEP-CBA-2010-08-06 (Central Banking)
- NEP-MAC-2010-08-06 (Macroeconomics)
- NEP-MON-2010-08-06 (Monetary Economics)
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