Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/287743 
Year of Publication: 
2024
Series/Report no.: 
Working Paper No. 228-2024
Publisher: 
Hochschule für Wirtschaft und Recht Berlin, Institute for International Political Economy (IPE), Berlin
Abstract: 
This paper presents a stock-flow-consistent model in which growth is led by exports and government expenditure. It considers domestic and external debt dynamics and gross capital flows. Countries may choose to not fully use their external space to accumulate international reserves. The model is then applied to an exercise of comparative dynamics to look at how an external shock led by a hike in US Fed foreign interest rates may impact growth and income distribution in a developing country under different policy responses. The shock forces the country to apply at least one contractionary macroeconomic policy or lose its reserves. Countries more financially integrated may only be able to balance external accounts through contractionary monetary policy. Accumulated international reserves may help maintain expansionary policies and higher average growth rates by providing liquidity in foreign currency.
Subjects: 
Supermultiplier
Structuralism
open economy growth
macroeconomic policy space
stock-flow-consistent modelling
JEL: 
E62
E63
F32
F43
O40
Document Type: 
Working Paper

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