Exchange Rate Policy under Sovereign Default Risk

Research, Preprint OPEN
Andreas Schabert (2011)
  • Publisher: Tinbergen Institute Amsterdam and Rotterdam
  • Subject: Flexibler Wechselkurs | Länderrisiko | E52 | info:eu-repo/classification/ddc/330 | F31 | public debt | info:eu-repo/classification/ddc/310 | Monetary policy options | Zinspolitik | Exchange rate peg, interest rate policy, equilibrium determination, sovereign default, public debt | interest rate policy | equilibrium determination | Internationale Staatsschulden | Exchange rate peg | Intertemporal insolvency | F41 | E63 | Kleine offene Volkswirtschaft | sovereign default | info:eu-repo/classification/ddc/620 | Small open economy | Equilibrium | Theorie
    • jel: jel:F41 | jel:E63 | jel:F31 | jel:E52
      ddc: ddc:330

We examine monetary policy options for a small open economy where sovereign default might occur due to intertemporal insolvency. Under interest rate policy and floating exchange rates the equilibrium is indetermined. Under a fixed exchange rate the equilibrium is unique... View more
  • References (8)

    [1] B. Daniel, The Fiscal Theory of the Price Level in an Open Economy, J. Monet. Econ. 48 (2001), 293-308.

    [2] J. Gali, and T. Monacelli, Monetary Policy and Exchange Rate Volatility in a Small Open Economy, Rev. Econ. Stud. 72 (2005), 707-734.

    [3] O. Jeanne, and A. Guscina, Government Debt in Emerging Market Countries: A New Data Set, IMF Working Paper WP/06/98 (2006).

    [4] E. Loyo, Tight Money Paradox on the Loose: A Fiscalist Hyperinflation, J.F. Kennedy School of Government, (2001) Harvard University.

    [5] A. Schabert, Monetary Policy under a Fiscal Theory of Sovereign Default, J. Econ. Theory 145 (2010), 860-868.

    [6] C. Sims, A Simple Model for the Study of the Determination of the Price Level and the Interaction of Monetary and Fiscal Policy, Econ. Theory 4 (1994), 381-399.

    [7] M. Uribe, A Fiscal Theory of Sovereign Risk, J. Monet. Econ. 53 (2006), 1857-1875.

    [8] M. Woodford, Monetary Policy and Price Level Determinacy in a Cash-in-Advance Economy, Econ. Theory 4 (1994), 345-380.

  • Similar Research Results (1)
  • Metrics
    No metrics available
Share - Bookmark