External debt sustainability under different policy rules

Gabriel Porcile (), Alexandre Souza () and Ricardo Viana ()
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Alexandre Souza: Department of Economics, Brazilian Central Bank
Ricardo Viana: Department of Physics, Universidade Federal do Paraná

No 105, Working Papers from Universidade Federal do Paraná, Department of Economics

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.

Keywords: central banks; open economy; external crisis (search for similar items in EconPapers)
JEL-codes: E12 E58 F43 (search for similar items in EconPapers)
Pages: 22 pages
Date: 2010
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
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Persistent link: https://EconPapers.repec.org/RePEc:fup:wpaper:0105

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