Balance of Payments Crises in a Cash-in-Advance Economy

Guillermo Calvo

Journal of Money, Credit and Banking, 1987, vol. 19, issue 1, 19-32

Abstract: The author shows that a flexible-prices, Sidrauski-type model with a cash-in-advance constraint is capable of depicting some of the phenomena associated with a balance of payments crisis, like the onesrecently observed in Argentina and Mexico (current-accounts deficits,and appreciation of the real exchange rat e). It is also shown that these phenomena become exacerbated as the rate of devaluation (before the crisis occurs) becomes smaller. Copyright 1987 by Ohio State University Press.

Date: 1987
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