Dynamic Responses to Policy and Exogenous Shocks in an Empirical Developing-Country Model with Rational Expectations
March 1, 1990
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Summary
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.
Subject: Expenditure, Import quotas, Inflation, Real interest rates, Stocks
Keywords: capital stock, demand pressure, excess demand, government spending, price level effect, trade balance, WP
Pages:
54
Volume:
1990
DOI:
Issue:
025
Series:
Working Paper No. 1990/025
Stock No:
WPIEA0251990
ISBN:
9781451920741
ISSN:
1018-5941
