Real Exchange Rate and Public Debt in a Two-Advanced-Country OLG Model
Karl Farmer and
Matthias Schelnast
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Matthias Schelnast: University of Graz
Chapter 16 in Growth and International Trade, 2021, pp 365-396 from Springer
Abstract:
Abstract The Euro crisis 2012 had caused concerns both with respect to public debt sustainability and the stability of exchange rates of highly indebted countries. This chapter investigates these concerns in a two-good, two-country OLG model of the world economy with country-specific saving rates to mimic also Asian economies. We find that the concerns with respect to debt sustainability are warranted since limits for national debt levels do exist. The concerns regarding exchange rate stability are not warranted since unilateral debt expansion does not impact the real exchange rate at all or the impacts are independent of the external balance of the debt-expanding country.
Keywords: Real exchange rate; Public debt; Saving rate; Debt level; Young household (search for similar items in EconPapers)
Date: 2021
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Chapter: Real Exchange Rate and Public Debt in a Two-Advanced-Country OLG Model (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:spr:sptchp:978-3-662-62943-7_16
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DOI: 10.1007/978-3-662-62943-7_16
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