Destabilizing Balance Sheet Effects in the New Consensus Model

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This paper proposes a simple modification of an otherwise standard New Consensus open economy model. We include an endogenous risk premium to show that a Taylor Rule that satisfies the Taylor Principle may lead to instability if exchange rate depreciations worsen the balance sheet of firms, exerting...

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Autor principal: Libman, Emiliano
Formato: Artículo
Lenguaje:en_US
Publicado: 2021
Materias:
Economía
Acceso en línea:https://link.springer.com/article/10.1057/s41302-019-00146-3#rightslink
http://repositorio.cedes.org/handle/123456789/4594
Aporte de:
Respositorio Digital CRIS del CEDES - Centro de Estudios de Estado y Sociedad de Centro de Estudios de Estado y Sociedad (CEDES)
id I61-R167123456789-4594
record_format dspace
institution Centro de Estudios de Estado y Sociedad (CEDES)
institution_str I-61
repository_str R-167
collection Respositorio Digital CRIS del CEDES - Centro de Estudios de Estado y Sociedad
language en_US
orig_language_str_mv en_US
topic Economía
spellingShingle Economía
Libman, Emiliano
Destabilizing Balance Sheet Effects in the New Consensus Model
topic_facet Economía
description This paper proposes a simple modification of an otherwise standard New Consensus open economy model. We include an endogenous risk premium to show that a Taylor Rule that satisfies the Taylor Principle may lead to instability if exchange rate depreciations worsen the balance sheet of firms, exerting a negative effect on output and employment. Thus, the adoption of Inflation Targeting and a flexible exchange rate regime introduces destabilizing forces in economies that are exposed to liability dollarization, and this helps to rationalize central bank interventions in the foreign exchange market to avoid large exchange rate fluctuations.
format Artículo
author Libman, Emiliano
author_facet Libman, Emiliano
author_sort Libman, Emiliano
title Destabilizing Balance Sheet Effects in the New Consensus Model
title_short Destabilizing Balance Sheet Effects in the New Consensus Model
title_full Destabilizing Balance Sheet Effects in the New Consensus Model
title_fullStr Destabilizing Balance Sheet Effects in the New Consensus Model
title_full_unstemmed Destabilizing Balance Sheet Effects in the New Consensus Model
title_sort destabilizing balance sheet effects in the new consensus model
publishDate 2021
url https://link.springer.com/article/10.1057/s41302-019-00146-3#rightslink
http://repositorio.cedes.org/handle/123456789/4594
work_keys_str_mv AT libmanemiliano destabilizingbalancesheeteffectsinthenewconsensusmodel
bdutipo_str Repositorios
_version_ 1764820545284603911

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