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External debt sustainability under different policy rules

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  • Gabriel Porcile

    ()
    (Department of Economics, Universidade Federal do Paraná)

  • Alexandre C. Gomes de Souza

    ()
    (Department of Economics, Brazilian Central Bank)

  • Ricardo Viana

    ()
    (Department of Physics, Universidade Federal do Paraná)

Abstract

The 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 Info

Paper provided by Universidade Federal do Paraná, Department of Economics in its series Working Papers with number 0105.

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Length: 22 pages
Date of creation: 2010
Date of revision:
Handle: RePEc:fup:wpaper:0105

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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Keywords: central banks; open economy; external crisis;

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