Exchange Rate Policy under Sovereign Default Risk

Andreas Schabert
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Andreas Schabert: TU Dortmund University, and University of Amsterdam

No 11-027/2, Tinbergen Institute Discussion Papers from Tinbergen Institute

Abstract: We examine monetary policy options for a small open economy where sovereign default might occur due to intertemporal insolvency. Under interest rate policy and floating exchange rates the equilibrium is indetermined. Under a fixed exchange rate the equilibrium is uniquely determined and independent of sovereign default.

Keywords: Exchange rate peg; interest rate policy; equilibrium determination; sovereign default; public debt (search for similar items in EconPapers)
JEL-codes: E52 E63 F31 F41 (search for similar items in EconPapers)
Date: 2011-02-11
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Citations: View citations in EconPapers (5)

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Journal Article: Exchange rate policy under sovereign default risk (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:tin:wpaper:20110027

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