Exchange rate policy under sovereign default risk

We examine monetary policy options for a small open economy where sovereign default might occur due to intertemporal insolvency. Under interest rate policy and floating exchange rates the equilibrium is indetermined. Under a fixed exchange rate the equilibrium is uniquely determined and independent of sovereign default.

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Year of publication:	2011
Authors:	Schabert, Andreas
Published in:	Economics Letters. - Elsevier, ISSN 0165-1765. - Vol. 112.2011, 2, p. 179-181
Publisher:	Elsevier
Keywords:	Exchange rate peg Interest rate policy Equilibrium determination Sovereign default Public debt

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Type of publication:	Article
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10009146161