Exchange-Rate Stability Causes Deterioration of the Productive Sphere and Destabilizes Developing Economies

Arturo Huerta G.

Economics Working Paper Archive from Levy Economics Institute

Abstract: For Matias Vernengo and Esteban Perez Caldentey (2020), the MMT literature overemphasizes the choice of the exchange rate regime and the relevance of a flexible exchange rate regime, as well as the ultimate effect of that choice upon the policy space. In addition, they argue that the role of capital flows is underexplored, and that the relevance of the balance-of-payments constraint is often underestimated. Vernengo and Perez's criticism fails to consider that exchange-rate flexibility makes it possible to use flexible fiscal and monetary policies as well, to boost growth and employment, and to reduce the balance-of-payments constraint.

Keywords: Capital Mobility; Currency; Exchange Rate; Financial Sector; Fiscal Policy; Foreign; Exchange Policy; Government Spending; Interest Rates; Monetary Policy; Real Activity (search for similar items in EconPapers)
JEL-codes: E42 E43 E44 O23 O24 (search for similar items in EconPapers)
Date: 2024-06
New Economics Papers: this item is included in nep-fdg and nep-pke
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.levyinstitute.org/wp-content/uploads/2024/06/wp_1052.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:lev:wrkpap:wp_1052

Access Statistics for this paper

More papers in Economics Working Paper Archive from Levy Economics Institute
Bibliographic data for series maintained by Lindsey Carter ().