Dynamic Responses to Policy and Exogenous Shocks in an Empirical Developing-Country Model with Rational Expectations

March 1, 1990

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Format: Chicago

Dynamic Responses to Policy and Exogenous Shocks in an Empirical Developing-Country Model with Rational Expectations, (USA: International Monetary Fund, 1990) accessed November 21, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

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

Publication Details

Pages:

54
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 1990/025
Stock No:

WPIEA0251990
ISBN:

9781451920741
ISSN:

1018-5941

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