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

Author

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  • Liquitaya Briceño, José

    (UAM)

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.

Suggested Citation

  • Liquitaya Briceño, José, 2011. "Políticas de Demanda, Choques Externos y Regímenes de Tipo de Cambio: un Análisis Formal," Revista Nicolaita de Estudios Económicos, Universidad Michoacana de San Nicolás de Hidalgo, Instituto de Investigaciones Económicas y Empresariales, vol. 0(2), pages 7-34.
    • Handle: RePEc:ris:rnicee:0061
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    More about this item

    Keywords

    Mundell-Fleming model; IS-LM model; fiscal; monetary and trade policy;
    All these keywords.

    JEL classification:

    • F40 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - General
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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