Balance of Payments Dynamics Under Fixed Floating

Slobodan Djajic

Working Paper from Economics Department, Queen's University

Abstract: This paper studies the dynamics of the balance of payments in response to policy disturbances under the assumption that the central bank devalues the country's currency over time at a constant preannounced rate. Depending on the model parameters, a given distribution may result in qualitatively different short-run balance of payments behaviour. In each case, however, the adjustment process leads the economy to a stable long-run equilibrium provided the government finances its spending according to a certain set of rules.

Pages: 19
Date: 1982
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Persistent link: https://EconPapers.repec.org/RePEc:qed:wpaper:458

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