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External debt sustainability under different policy rules

Author

Listed:
  • 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.

Suggested Citation

  • Gabriel Porcile & Alexandre C. Gomes de Souza & Ricardo Viana, 2010. "External debt sustainability under different policy rules," Working Papers 0105, Universidade Federal do Paraná, Department of Economics.
    • 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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    File URL: http://www.economiaetecnologia.ufpr.br/textos_discussao/texto_para_discussao_ano_2010_texto_09.pdf
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    References listed on IDEAS

    as
    1. Juan Carlos Moreno-Brid, 1998. "On Capital Flows and The Balance-of-Payments-Constrained Growth Model," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 21(2), pages 283-298, December.
    2. Juan Carlos Moreno-Brid, 1999. "On Capital Flows and the Balance-of-Payments-Constrained Growth Model," Journal of Post Keynesian Economics, M.E. Sharpe, Inc., vol. 21(2), pages 283-298, January.
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    More about this item

    Keywords

    central banks; open economy; external crisis;
    All these keywords.

    JEL classification:

    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian; Modern Monetary Theory
    • 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

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