Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/277438 
Year of Publication: 
2019
Citation: 
[Journal:] European Journal of Economics and Economic Policies: Intervention (EJEEP) [ISSN:] 2052-7772 [Volume:] 16 [Issue:] 1 [Year:] 2019 [Pages:] 94-133
Publisher: 
Edward Elgar Publishing, Cheltenham
Abstract: 
This paper attempts to explain the role of capital inflows in creating economic booms and busts in a small open economy with sovereign currency. We develop a stock–flow consistent (SFC) model for a small open economy while relying on the experience of the Icelandic crisis. We demonstrate the destabilising effects of capital inflows on the economy by allowing for a sudden stop, and also discuss the role of capital controls as a policy response in the event of a crisis due to sudden stops. Finally, we discuss the policy implications of our results in order to tackle the destabilising effects associated with financial flows in a small economy.
Subjects: 
post-Keynesian
stock–flow consistent
monetary policy
capital controls
sudden stops
financial crisis
JEL: 
E12
F32
F38
F41
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by Logo
Document Type: 
Article

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