On domestic financial market frictions, unrestricted international capital flows, and crises in small open economies
Gaetano Antinolfi, Elisabeth Huybens, Instituto Tecnológico Autónomo de México. Centro de Investigación Económica
Instituto Tecnologico Autonomo de Mexico, 1998 - Foreign exchange rates - 50 pages
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Antinolfi approaching this steady assumption behavior Capital Accumulation Cobb-Douglas credit rationing crisis CSV problem D(ka denote depreciation Discussion Paper domestic credit markets endogenous equilibrium path example expected return fb(kb Financial Market Frictions follows foreign assets funds GDP2 Hence herd behavior high-output-low-RER steady Huybens implies income increase informational asymmetry Interest Rate Shock intermediaries internal finance international capital flows international capital markets labor force employed Lemma lenders level of GDP loan interest rate locally monotone dynamics long-run equilibria low capital-labor ratio low-output-high-RER steady market clearing money growth rate monitoring costs Moreover nominal exchange rate non-tradable sector ORTIGUEIRA paths approaching potential borrowers principal plus interest producers of type production Proposition real exchange rate real interest rate RER steady RER2 saddle path sink small open economy steady state display steady state equilibria T(ka tradable sector trajectory type a capital Williamson 1986 world interest rate world real interest