The External Constraint and Short-Run Macroeconomic Policy: Theory with an Application to Argentina, Brazil and Mexico

Alberto Paloni ()

Scottish Journal of Political Economy, 1994, vol. 41, issue 3, 256-77

Abstract: This paper discusses how the need to achieve external equilibrium constrains short-run macroeconomic policy. A distinction is made between the external balance constraint - which requires the elimination of external deficits - and the financing constraint. Under the former, adjustment can be gradual and any output contraction can be avoided by a combination of expenditure-reducing and expenditure-switching policies. Economic recession may be unavoidable under a financing constraint because adjustment must be immediate. This is shown to be the case both in Argentina and Mexico, and to a lesser extent, in Brazil. The paper shows that the path of stabilization that minimizes adjustment costs is sensitive to the dynamic structure of the particular economy. Copyright 1994 by Scottish Economic Society.

Date: 1994
References: Add references at CitEc
Citations:

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

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:bla:scotjp:v:41:y:1994:i:3:p:256-77

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=0036-9292

Access Statistics for this article

Scottish Journal of Political Economy is currently edited by Tim Barmby, Andrew Hughes-Hallett and Campbell Leith

More articles in Scottish Journal of Political Economy from Scottish Economic Society Contact information at EDIRC.
Bibliographic data for series maintained by Wiley Content Delivery ().