Dynamic Responses to Policy and Exogenous Shocks in an Empirical Developing-Country Model with Rational Expectations

International Monetary Fund

No 1990/025, IMF Working Papers from International Monetary Fund

Abstract: The dynamic responses of a developing economy to a variety of policy and external shocks are studied using an empirical macroeconomic model which embodies rational expectations, perfect capital mobility, and import rationing. These features, which are relatively new in developing-country modelling, prove to be quite important in determining the model’s dynamic properties. This suggests that macroeconomic management in developing countries--such as that involved in short-run stabilization--requires that such features be explicitly taken into account.

Keywords: WP; capital stock; government spending; price level effect; demand pressure; excess demand; trade balance (search for similar items in EconPapers)
Pages: 54
Date: 1990-03-01
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