Speculative attacks, openness and crises
Autor(a) principal: | |
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Data de Publicação: | 2012 |
Outros Autores: | , |
Tipo de documento: | Artigo |
Idioma: | por eng |
Título da fonte: | Revista Brasileira de Economia (Online) |
Texto Completo: | https://periodicos.fgv.br/rbe/article/view/3505 |
Resumo: | In this paper we propose a dynamic stochastic general equilibrium model to evaluate financial adjustments that some emerging market economies went through to overcome external crises during the latest decades, such as default and local currency devaluation. We assume that devaluation can be used to avoid external debt default, to improve trade balance and to reduce the real public debt level denominated in local currency. Such effects increase the government ability to deal with external crisis, but also have costs in terms of welfare, related to expected inflation, reductions in private investments and higher interest to be paid over the public debt. We conclude that openness improves expected welfare as it allows for a better devaluation-response technology against crises. We also present results for 32 middle-income countries, verifying that the proposed model can indicate, in a stylized way, the preferences for default-devaluation options and the magnitude of the currency depreciation required to overcome 48 external crises occurred as from 1971. Finally, as we construct our model based on the Cole-Kehoe self-fulfilling debt crisis model, adding local debt and trade, it is important to say that their policy alternatives to leave the crisis zone remains in our extended model, namely, to reduce the external debt level and to lengthen its maturity. |
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Speculative attacks, openness and crisesSpeculative attacks, openness and crisesTrade-opennessspeculative attacksand debt crisis.Trade-opennesscurrency crisisspeculative attacksand debt crisisIn this paper we propose a dynamic stochastic general equilibrium model to evaluate
financial adjustments that some emerging market economies went through to overcome external crises during the latest decades, such as default and local currency devaluation. We assume that devaluation can be used to avoid external debt default, to improve trade balance and to reduce the real public debt level denominated in local currency. Such effects increase the government ability to deal with external crisis, but also have costs in terms of welfare, related to expected inflation, reductions in private investments and higher interest to be paid over the public debt. We conclude that openness improves expected welfare as it allows for a better devaluation-response technology against crises. We also present results for 32 middle-income countries, verifying that the proposed model can indicate, in a stylized way, the preferences for default-devaluation options and the magnitude of the currency depreciation required to overcome 48 external crises occurred as from 1971. Finally, as we construct our model based on the Cole-Kehoe self-fulfilling debt crisis model, adding local debt and trade, it is important to say that their policy alternatives to leave the crisis zone remains in our extended model, namely, to reduce the external debt level and to lengthen its maturity.Com base em uma versão estendida do modelo Cole and Kehoe, avaliamos eventos de default e de desvalorizações cambiais. Historicamente, as desvalorizações têm ajudado na superação de crises financeiras ao estimular a balança comercial e ao reduzir o valor real da divida publica denominada em moeda nacional. Por outro lado, a expectativa de uma possível desvalorização produz efeitos negativos sobre o bem-estar: aumento do custo da divida e redução do nível de investimento privado. Modelamos esses trade-offs e mostramos que a abertura comercial melhora o bem-estar ao potencializar o efeito da desvalorização de câmbio sobre a balança comercial. Computamos simulações numéricas baseadas em 48 crises ocorridas em 32 países, e obtivemos resultados alinhados com as desvalorizações e os defaults observados desde 1971.EGV EPGE2012-06-13info:eu-repo/semantics/articleinfo:eu-repo/semantics/publishedVersionArticlesArtigosapplication/pdfapplication/pdfhttps://periodicos.fgv.br/rbe/article/view/3505Revista Brasileira de Economia; Vol. 66 No. 2 (2012): Abr-Jun; 135-165Revista Brasileira de Economia; v. 66 n. 2 (2012): Abr-Jun; 135-1651806-91340034-7140reponame:Revista Brasileira de Economia (Online)instname:Fundação Getulio Vargas (FGV)instacron:FGVporenghttps://periodicos.fgv.br/rbe/article/view/3505/2651https://periodicos.fgv.br/rbe/article/view/3505/2655Araujo, AloisioLeon, MarciaSantos, Rafaelinfo:eu-repo/semantics/openAccess2016-12-16T12:28:06Zoai:ojs.periodicos.fgv.br:article/3505Revistahttps://periodicos.fgv.br/rbe/https://periodicos.fgv.br/rbe/oai||rbe@fgv.br1806-91340034-7140opendoar:2024-03-06T13:03:29.769689Revista Brasileira de Economia (Online) - Fundação Getulio Vargas (FGV)true |
dc.title.none.fl_str_mv |
Speculative attacks, openness and crises Speculative attacks, openness and crises |
title |
Speculative attacks, openness and crises |
spellingShingle |
Speculative attacks, openness and crises Araujo, Aloisio Trade-openness speculative attacks and debt crisis. Trade-openness currency crisis speculative attacks and debt crisis |
title_short |
Speculative attacks, openness and crises |
title_full |
Speculative attacks, openness and crises |
title_fullStr |
Speculative attacks, openness and crises |
title_full_unstemmed |
Speculative attacks, openness and crises |
title_sort |
Speculative attacks, openness and crises |
author |
Araujo, Aloisio |
author_facet |
Araujo, Aloisio Leon, Marcia Santos, Rafael |
author_role |
author |
author2 |
Leon, Marcia Santos, Rafael |
author2_role |
author author |
dc.contributor.author.fl_str_mv |
Araujo, Aloisio Leon, Marcia Santos, Rafael |
dc.subject.por.fl_str_mv |
Trade-openness speculative attacks and debt crisis. Trade-openness currency crisis speculative attacks and debt crisis |
topic |
Trade-openness speculative attacks and debt crisis. Trade-openness currency crisis speculative attacks and debt crisis |
description |
In this paper we propose a dynamic stochastic general equilibrium model to evaluate
financial adjustments that some emerging market economies went through to overcome external crises during the latest decades, such as default and local currency devaluation. We assume that devaluation can be used to avoid external debt default, to improve trade balance and to reduce the real public debt level denominated in local currency. Such effects increase the government ability to deal with external crisis, but also have costs in terms of welfare, related to expected inflation, reductions in private investments and higher interest to be paid over the public debt. We conclude that openness improves expected welfare as it allows for a better devaluation-response technology against crises. We also present results for 32 middle-income countries, verifying that the proposed model can indicate, in a stylized way, the preferences for default-devaluation options and the magnitude of the currency depreciation required to overcome 48 external crises occurred as from 1971. Finally, as we construct our model based on the Cole-Kehoe self-fulfilling debt crisis model, adding local debt and trade, it is important to say that their policy alternatives to leave the crisis zone remains in our extended model, namely, to reduce the external debt level and to lengthen its maturity. |
publishDate |
2012 |
dc.date.none.fl_str_mv |
2012-06-13 |
dc.type.driver.fl_str_mv |
info:eu-repo/semantics/article info:eu-repo/semantics/publishedVersion Articles Artigos |
format |
article |
status_str |
publishedVersion |
dc.identifier.uri.fl_str_mv |
https://periodicos.fgv.br/rbe/article/view/3505 |
url |
https://periodicos.fgv.br/rbe/article/view/3505 |
dc.language.iso.fl_str_mv |
por eng |
language |
por eng |
dc.relation.none.fl_str_mv |
https://periodicos.fgv.br/rbe/article/view/3505/2651 https://periodicos.fgv.br/rbe/article/view/3505/2655 |
dc.rights.driver.fl_str_mv |
info:eu-repo/semantics/openAccess |
eu_rights_str_mv |
openAccess |
dc.format.none.fl_str_mv |
application/pdf application/pdf |
dc.publisher.none.fl_str_mv |
EGV EPGE |
publisher.none.fl_str_mv |
EGV EPGE |
dc.source.none.fl_str_mv |
Revista Brasileira de Economia; Vol. 66 No. 2 (2012): Abr-Jun; 135-165 Revista Brasileira de Economia; v. 66 n. 2 (2012): Abr-Jun; 135-165 1806-9134 0034-7140 reponame:Revista Brasileira de Economia (Online) instname:Fundação Getulio Vargas (FGV) instacron:FGV |
instname_str |
Fundação Getulio Vargas (FGV) |
instacron_str |
FGV |
institution |
FGV |
reponame_str |
Revista Brasileira de Economia (Online) |
collection |
Revista Brasileira de Economia (Online) |
repository.name.fl_str_mv |
Revista Brasileira de Economia (Online) - Fundação Getulio Vargas (FGV) |
repository.mail.fl_str_mv |
||rbe@fgv.br |
_version_ |
1798943114393550848 |