Monetary and Fiscal Policies in a Sudden Stop: Is Tighter Brighter?
In this paper we ask whether tighter monetary and fiscal policies are the right way to face a sudden stop (a sudden curtailment in capital flows) in a typical emerging economy. We develop exogenous measures of fiscal and monetary policy response and conclude that tighter policies are associated to larger falls in output. The conclusion of the analysis is not so much that macro policies should be relaxed upon a crisis, but that countries should prepare themselves by creating the conditions to be able to act countercyclically upon such events. This entails among other things reducing balance sheet mismatches or strenghtening fiscal results during expansions.
|Date of creation:||Nov 2007|
|Contact details of provider:|| Postal: 79 JFK Street, Cambridge, MA 02138|
Web page: http://www.ksg.harvard.edu/research/working_papers/index.htm
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Robert P. Hagemann, 1999. "The Structural Budget Balance The IMFâ€™s Methodology," IMF Working Papers 99/95, International Monetary Fund.
- Reinhart, Carmen & Calvo, Guillermo, 2002.
"Fear of floating,"
14000, University Library of Munich, Germany.
- Alejandro Izquierdo & Ernesto Talvi & Guillermo A Calvo, 2006.
"Phoenix miracles in emerging markets: recovering without credit from systemic financial crises,"
BIS Working Papers
221, Bank for International Settlements.
- Guillermo A. Calvo & Alejandro Izquierdo & Ernesto Talvi, 2006. "Phoenix Miracles in Emerging Markets: Recovering without Credit from Systemic Financial Crises," Research Department Publications 4474, Inter-American Development Bank, Research Department.
- Guillermo A. Calvo & Alejandro Izquierdo & Ernesto Talvi, 2006. "Phoenix Miracles in Emerging Markets: Recovering without Credit from Systemic Financial Crises," NBER Working Papers 12101, National Bureau of Economic Research, Inc.
- Sungbae An & Frank Schorfheide, 2007.
"Bayesian Analysis of DSGE Models,"
Taylor & Francis Journals, vol. 26(2-4), pages 113-172.
- Calvo, Guillermo A., 1983. "Staggered prices in a utility-maximizing framework," Journal of Monetary Economics, Elsevier, vol. 12(3), pages 383-398, September.
- Aghion, Philippe & Bacchetta, Philippe & Banerjee, Abhijit, 2000.
"Currency Crises and Monetary Policy in an Economy with Credit Constraints,"
CEPR Discussion Papers
2529, C.E.P.R. Discussion Papers.
- Aghion, Philippe & Bacchetta, Philippe & Banerjee, Abhijit, 2001. "Currency crises and monetary policy in an economy with credit constraints," European Economic Review, Elsevier, vol. 45(7), pages 1121-1150.
- Philippe Aghion & Philippe Bacchetta & Abhijit Banerjee, 2000. "Currency Crises and Monetary Policy in an Economy with Credit Constraints," Working Papers 00.07, Swiss National Bank, Study Center Gerzensee.
- Banerjee, Abhijit & Bacchetta, Philippe & Aghion, Philippe, 2001. "Currency Crises and Monetary Policy in an Economy with Credit Constraints," Scholarly Articles 4554218, Harvard University Department of Economics.
- Francesco Caselli & James Feyrer, 2007.
"The Marginal Product of Capital,"
The Quarterly Journal of Economics,
Oxford University Press, vol. 122(2), pages 535-568.
- Francesco Caselli & James Feyrer, 2005. "The Marginal Product of Capital," NBER Working Papers 11551, National Bureau of Economic Research, Inc.
- Francesco Caselli & James Feyrer, 2006. "The marginal product of capital," LSE Research Online Documents on Economics 3560, London School of Economics and Political Science, LSE Library.
- Francesco Caselli & James Feyrer, 2006. "The Marginal Product of Capital," CEP Discussion Papers dp0735, Centre for Economic Performance, LSE.
- Caselli, Francesco & Feyrer, James, 2005. "The Marginal Product of Capital," CEPR Discussion Papers 5203, C.E.P.R. Discussion Papers.
- Sims, Christopher A, 2002.
"Solving Linear Rational Expectations Models,"
Springer;Society for Computational Economics, vol. 20(1-2), pages 1-20, October.
- Christopher Sims, 2001. "Matlab Code for Solving Linear Rational Expectations Models," QM&RBC Codes 11, Quantitative Macroeconomics & Real Business Cycles.
- Fabio Braggion & Lawrence J. Christiano & Jorge Roldos, 2007.
"Optimal Monetary Policy in a 'Sudden Stop',"
NBER Working Papers
13254, National Bureau of Economic Research, Inc.
- Marcel, Mario & Tokman R., Marcelo & Valdés, Rodrigo O. & Benavides, Paula, 2003. "Structural budget balance: methodology and estimation for the Chilean central government 1987-2001," Seminarios y Conferencias 6573, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL).
- Alberto Ortiz & Federico Sturzenegger, 2007. "Estimating Sarb'S Policy Reaction Rule," South African Journal of Economics, Economic Society of South Africa, vol. 75(4), pages 659-680, December.
- Hausmann, Ricardo & Panizza, Ugo & Stein, Ernesto, 2001.
"Why do countries float the way they float?,"
Journal of Development Economics,
Elsevier, vol. 66(2), pages 387-414, December.
- Ricardo Hausmann & Ugo Panizza & Ernesto H. Stein, 2000. "Why Do Countries Float the Way They Float?," Research Department Publications 4205, Inter-American Development Bank, Research Department.
- Ricardo Hausmann & Ugo Panizza & Ernesto H. Stein, 2000. "Why Do Countries Float the Way They Float?," IDB Publications (Working Papers) 6467, Inter-American Development Bank.
- Claude Giorno & Pete Richardson & Deborah Roseveare & Paul van den Noord, 1995. "Estimating Potential Output, Output Gaps and Structural Budget Balances," OECD Economics Department Working Papers 152, OECD Publishing.
- Levy-Yeyati, Eduardo & Sturzenegger, Federico, 2005. "Classifying exchange rate regimes: Deeds vs. words," European Economic Review, Elsevier, vol. 49(6), pages 1603-1635, August.
- Guillermo A. Calvo & Ernesto Talvi, 2005. "Sudden Stop, Financial Factors and Economic Collpase in Latin America: Learning from Argentina and Chile," NBER Working Papers 11153, National Bureau of Economic Research, Inc.
- Guillermo A. Calvo & Alejandro Izquierdo & Rudy Loo-Kung, 2005.
"Relative Price Volatility Under Sudden Stops: The Relevance of Balance Sheet Effects,"
NBER Working Papers
11492, National Bureau of Economic Research, Inc.
- Calvo, Guillermo A. & Izquierdo, Alejandro & Loo-Kung, Rudy, 2006. "Relative price volatility under Sudden Stops: The relevance of balance sheet effects," Journal of International Economics, Elsevier, vol. 69(1), pages 231-254, June.
When requesting a correction, please mention this item's handle: RePEc:ecl:harjfk:rwp07-057. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()
If references are entirely missing, you can add them using this form.