Speculative attacks, openness and crises
Autor(a) principal: | |
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Data de Publicação: | 2007 |
Outros Autores: | , |
Tipo de documento: | Artigo |
Idioma: | eng |
Título da fonte: | Repositório Institucional do FGV (FGV Repositório Digital) |
Texto Completo: | http://hdl.handle.net/10438/769 |
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 real 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 ([7]), 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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Santos, Rafael ChavesAraújo, Aloísio Pessoa deLeon, Márcia SaraivaEscolas::EPGEFGV2008-05-13T15:33:34Z2008-05-13T15:33:34Z2007-09-010104-8910http://hdl.handle.net/10438/769In 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 real 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 ([7]), 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.engEscola de Pós-Graduação em Economia da FGVEnsaios Econômicos;654Trade-opennessSpeculative attacksCurrency crisisDebt crisisEconomiaEconomiaSpeculative attacks, openness and crisesinfo:eu-repo/semantics/publishedVersioninfo:eu-repo/semantics/articlereponame:Repositório Institucional do FGV (FGV Repositório Digital)instname:Fundação Getulio Vargas (FGV)instacron:FGVinfo:eu-repo/semantics/openAccessORIGINAL2228.pdfapplication/pdf426901https://repositorio.fgv.br/bitstreams/075908d5-ee17-424d-a4ca-6db3b166ffba/download2186f5cdf0eaf0a288f0052c070a72d4MD51TEXT2228.pdf.txt2228.pdf.txtExtracted texttext/plain56817https://repositorio.fgv.br/bitstreams/652838cb-f128-4261-bac5-13960827a402/download8685f8a965a824491f9ce55f429291adMD56THUMBNAIL2228.pdf.jpg2228.pdf.jpgGenerated Thumbnailimage/jpeg3339https://repositorio.fgv.br/bitstreams/5162453b-b820-43da-9a51-7672a950b068/download5d5d70d8293bcbbe88d61713257658ddMD5710438/7692023-11-09 20:50:32.074open.accessoai:repositorio.fgv.br:10438/769https://repositorio.fgv.brRepositório InstitucionalPRIhttp://bibliotecadigital.fgv.br/dspace-oai/requestopendoar:39742023-11-09T20:50:32Repositório Institucional do FGV (FGV Repositório Digital) - Fundação Getulio Vargas (FGV)false |
dc.title.eng.fl_str_mv |
Speculative attacks, openness and crises |
title |
Speculative attacks, openness and crises |
spellingShingle |
Speculative attacks, openness and crises Santos, Rafael Chaves Trade-openness Speculative attacks Currency crisis Debt crisis Economia Economia |
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 |
Santos, Rafael Chaves |
author_facet |
Santos, Rafael Chaves Araújo, Aloísio Pessoa de Leon, Márcia Saraiva |
author_role |
author |
author2 |
Araújo, Aloísio Pessoa de Leon, Márcia Saraiva |
author2_role |
author author |
dc.contributor.unidadefgv.por.fl_str_mv |
Escolas::EPGE |
dc.contributor.affiliation.none.fl_str_mv |
FGV |
dc.contributor.author.fl_str_mv |
Santos, Rafael Chaves Araújo, Aloísio Pessoa de Leon, Márcia Saraiva |
dc.subject.eng.fl_str_mv |
Trade-openness Speculative attacks |
topic |
Trade-openness Speculative attacks Currency crisis Debt crisis Economia Economia |
dc.subject.por.fl_str_mv |
Currency crisis Debt crisis |
dc.subject.area.por.fl_str_mv |
Economia |
dc.subject.bibliodata.por.fl_str_mv |
Economia |
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 real 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 ([7]), 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 |
2007 |
dc.date.issued.fl_str_mv |
2007-09-01 |
dc.date.accessioned.fl_str_mv |
2008-05-13T15:33:34Z |
dc.date.available.fl_str_mv |
2008-05-13T15:33:34Z |
dc.type.status.fl_str_mv |
info:eu-repo/semantics/publishedVersion |
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article |
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http://hdl.handle.net/10438/769 |
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0104-8910 |
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0104-8910 |
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http://hdl.handle.net/10438/769 |
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eng |
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eng |
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Ensaios Econômicos;654 |
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info:eu-repo/semantics/openAccess |
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openAccess |
dc.publisher.none.fl_str_mv |
Escola de Pós-Graduação em Economia da FGV |
publisher.none.fl_str_mv |
Escola de Pós-Graduação em Economia da FGV |
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