Economic booms, trade deficits and economic policy

Francisco Alcalá and Diego Peñarrubia

Economics Working Papers from Department of Economics and Business, Universitat Pompeu Fabra

Abstract: Many economic booms have been accompanied by real exchange rate appreciations, large trade defcits -which have sometimes persisted after the return to the initial exchange rate parity- and a deteriorating traded sector. Those circumstances have typically raised the question of the de-sirability of some stabilization policy. We show that the dynamics induced by an expected productivity shock in an economy where the capital stock is non-mobile across sectors, match those circumstances. Furthermore, we obtain that credit market imperfections tend to exacerbate trade deficits, and to cause an inefficient capacity reduction in the traded sector. Some stabilization policies are explored.

Keywords: New open economy macroeconomics; non-traded-goods; financial accelerator; trade deficit persistence (search for similar items in EconPapers)
JEL-codes: E62 F41 F43 (search for similar items in EconPapers)
Date: 2000-07
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://econ-papers.upf.edu/papers/397.pdf Whole Paper (application/pdf)

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:upf:upfgen:397

Access Statistics for this paper

More papers in Economics Working Papers from Department of Economics and Business, Universitat Pompeu Fabra
Bibliographic data for series maintained by ( this e-mail address is bad, please contact ).