External debt sustainability under different policy rules
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.
|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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- 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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